Legendary investor Warren Buffet termed it "a weapon of mass destruction". His peer Charlie Munger described it as "a casino in drag". This is what the billionaire businessmen thought of derivatives trading. Back home in India—the world’s largest market for trading in equity futures and options (F&O)—the Securities and Exchange Board of India (SEBI) backed it with data. It found that ~90% of 4.5 million individual traders suffered losses while engaging in derivatives trading in the year ended March 2022. Derivatives trading involves buying and selling contracts based on underlying assets such as stocks, bonds, commodities, or currencies. Futures impose a commitment to buy, while options grant the right but not the obligation to buy or sell at a fixed price by a set date. Like bees to honey, the bull market that began in April 2020 lured many first-time traders. Sebi said the number of individual equity F&O traders among the top 10 brokerages in the sample group increased 5X to ~4.5 million between the years ended March 2019 and March 2022. And this included even 20-year-olds. Despite making up only 1% of traders, those under the age of 20 saw the highest average losses compared to other age groups. The journey of four different traders—an 18-year-old, a 28-year-old man, a woman, and a seasoned trader—to weave a cautionary tale on their unique motivations and why derivatives trading needs careful treading.
