It is June 2024. Roshan Aggarwal is a CA based in Assam. A B-Tech third year student came to him to file income tax return. In 2023-2024, futures and options (F&O) trading will cost it Rs. 26 lakhs was lost, but there was no source of income. Even a year ago that student suffered a loss of 20 lakh rupees.
Even parents are not aware of this loss. Parents are separated. Mother runs a hotel business. He took personal loans from microfinance mobile apps for futures and options trading, borrowed money from friends and even withdrew money from his parents' accounts without informing them.
CA said- the student used to take his financial decisions under the influence of social media and friends. A friend of his earned Rs 1 crore from F&O trading last year. When the CA asked the student why he did not quit trading, the student said that he had become addicted to it and could not quit.
This is not just one person's story, a recent SEBI report shows that 93% i.e. 93 out of every 100 traders trading in the F&O segment are making losses. Between FY 2022 and 2024, 93 lakh out of over 1 crore F&O traders have incurred losses of Rs 1.8 lakh crore. The proportion of people below 30 years of age doing F&O trading was 31% in FY23, which has increased to 43% in FY24.
SEBI's new circular to protect retail investors from losses, three big things…
1. Upfront collection of premium from option buyers: Option premium will be collected upfront from option buyers. Most brokers are already following this rule, but those who are not will have to do so as well. This rule will come into effect from 1 February 2025.
2. Increased contract size for index derivatives: The contract size for SEBA index futures and options is Rs. 5-10 lakhs to Rs. 15 lakh has been done. That is, now buyers will have to pay more for a lot, this rule will be applicable from November 20, 2024.
3. Limiting termination to one per exchange: Weekly index expirations are limited to one per exchange. That means indices like Nifty, Bank Nifty, Nifty Financial will expire on the same day. Earlier it used to happen on different days of the week.
The lot size of Nifty 50 increased from 25 to 75
The National Stock Exchange (NSE) has increased the lot size of all five of its index derivatives contracts, following an order from market regulator Sebi. The lot size of Nifty 50 has been increased from 25 to 75, which is 3 times more.
The lot size of Nifty Bank has been increased from 15 to 30. Sebi hopes that this move will reduce the participation of retail investors in F&O. The new lot size will be applicable from 20 November 2024.
Image Credit: (Divya-Bhaskar): Images/graphics belong to (Divya-Bhaskar).
