This shift, driven by the perception that F&O trading is a lucrative avenue for high returns, is compounded by the ease of access through digital trading platforms. However, while the rising participation of retail traders in the F&O segment may seem like good news, they mask a concerning reality: a substantial portion of these traders are incurring losses.
Nilesh Sharma, Executive Director & President of SAMCO Securities, shares some insights on the fundamental problem for F&O traders in India.
“Unlike traditional equity investments, F&O trading involves complex financial instruments that come with inherently high risks. The allure of quick profits often overshadows the reality of the potential financial risks involved. This has led to a situation where a large number of individual traders find themselves on the losing side of their trades, struggling to navigate the volatile and intricate world of F&O markets.
At SAMCO Securities, we recognise the critical need for empowering traders, especially in such a high-stakes market. To address this, we have committed to making essential tools like options Greeks, TradingView charts, and post-trade analytics through My Trade Story readily accessible to our clients on their mobile devices.”
Nilesh’s concerns are backed by solid numbers from a recent report published by the Securities and Exchange Board of India (SEBI), the findings from which highlight the glaring gap in the retail F&O trading segment.
The Key Insights from SEBI’s Report
SEBI’s report reveals that an overwhelming 89% of individual derivative traders have reportedly lost capital in this segment. The average loss per trader stands around Rs 1.1 lakh, which is a significant figure considering the average income levels in India. It’s also evident that while the number of F&O traders has increased exponentially by over 500% in just three years, the rate of success has not seen a commensurate rise. This discrepancy points to a critical gap in the trading ecosystem.
What’s Driving the Losses in the F&O Segment
The unavailability of advanced tools in options trading platforms emerges as a significant contributor to these challenges. Given the complex and high-risk nature of F&O trading, the right tools can be the difference between success and failure. In the absence of such tools, traders are left to rely on incomplete information, increasing the likelihood of losses.
Sharma explains the repercussions of this issue and what SAMCO is doing to bridge this gap:
“One of the primary issues we’ve identified at SAMCO Securities is the limited access to advanced trading tools for the average trader. Sophisticated tools such as options Greeks and dynamic real-time trading charts are essential for making informed F&O trading decisions. However, these tools often come at a premium, making them inaccessible to a large segment of retail traders.
This lack of access or the prohibitive cost of these tools leaves many traders reliant on basic, often inadequate, resources. As a result, they are unable to fully grasp market dynamics, assess risks accurately, or optimise their trading strategies effectively.
At SAMCO, we are acutely aware of this gap and are committed to bridging it. We aim to ensure that every trader, no matter what their trading volume or experience may be, deserves access to the right tools in the market. That’s why we have taken a significant step towards democratising access to advanced trading tools. We are now offering tools like options Greeks, TradingView charts and post-trade analytics through My Trade Story free of charge to our clients.”
By doing so, SAMCO is levelling the playing field and empowering traders to make more informed, data-driven decisions. Let’s explore the advanced tools that SAMCO offers F&O traders at no additional charge.
Redefining F&O Trading Success with SAMCO’s Advanced Trading Tools
By providing sophisticated tools for options trading, SAMCO aims to equip traders with the resources they need for informed decision-making. This initiative is part of the stock broking firm’s broader strategy to demystify F&O trading for retail investors and provide them with equal opportunities for trading success. To this end, SAMCO Securities is offering the following advanced trading tools as a part of its options trading platform.
- My Trade Story: A Gateway for Post-Trade Analysis
Every trade has its own story, especially in the F&O segment where complexities abound. Understanding these stories is vital for traders, but dissecting each trade for insights is not feasible manually.
‘My Trade Story’ by SAMCO Securities changes this. It’s a tool that unlocks the hidden insights of F&O trades through post-trade analysis. It offers detailed views on trade performance and potential improvements. Traders can use it to review their decisions and strategies, learning from both successes and losses.
SAMCO’s Nilesh Sharma explains the importance of post-trade analysis:
“The significance of post-trade analysis cannot be overstated. It’s the process of self-assessment, where F&O traders learn from their past experiences to improve their future performance. By meticulously examining their F&O trade histories, traders can identify patterns and trends in this complex market segment, evaluate the effectiveness of their futures and options trading strategies, and make data-driven decisions in subsequent F&O trades.”
- Options Greeks at Every Trader’s Fingertips
Many options traders remain startlingly unaware of what options Greeks are and how they can be crucial for creating effective options trading strategies. Let’s delve into the key options Greeks and what they mean for F&O traders.
- Delta: The Direction Indicator
Delta is perhaps the most well-known of the Greeks. It measures the sensitivity of an option’s price to changes in the underlying asset’s price. In simpler terms, it tells traders how much the option’s price is likely to change for every 1-rupee change in the underlying asset’s price. F&O traders can use options delta to gauge the directional exposure of their options positions, hedge their portfolios, balance risk and make speculative trades based on their market outlook.
- Gamma: The Rate of Change Indicator
Gamma measures how fast the delta of an option changes as the underlying asset’s price fluctuates. When gamma is high, it means the delta is more sensitive to small price changes in the underlying asset (and vice versa). By adjusting positions based on the gamma values, traders can ensure that their portfolios remain balanced and optimally responsive to market movements.
- Theta: The Time Decay Indicator
Theta represents the rate of time decay in the price of an option. As options approach their expiration date, their time value erodes and causes the theta to increase. The Theta is critical for traders employing strategies that profit from time decay, such as writing covered calls or credit spreads. Conversely, options buyers who wish to minimise the impact of time decay can use this metric to select options with lower theta.
- Vega: The Volatility Indicator
Vega measures how much an option’s price is expected to change for a 1% change in implied volatility. When the implied volatility rises, option prices tend to increase. Conversely, when the IV falls, option prices tend to decrease. Traders often use vega to assess their exposure to changes in market volatility. Strategies involving vega include iron condors, straddles and strangles.
- TradingView Charts to Monitor the Markets Real-Time
SAMCO’s next-gen trading app now features integrated TradingView charts, enhancing its options trading platform. Traders can access advanced charting tools directly within the app, eliminating the need to switch between platforms. This integration offers Kagi and Renko charts for focusing on key price movements, Heikin Ashi charts for a clear view of trends, and various candlestick patterns to identify market reversals and continuations.
Improving Options Trading Success with SAMCO Securities
SAMCO Securities is revolutionising the F&O trading experience for retail traders in India by offering an array of sophisticated and advanced trading tools free of charge. This unprecedented access to crucial resources such as My Trade Story for post-trade analysis, options Greeks for strategic planning and TradingView charts for real-time market monitoring significantly enhances the decision-making capabilities of traders.
By democratising access to these tools, SAMCO is allowing every trader to tap into the full potential of the F&O market. The firm’s commitment to empowering traders is evident in its efforts to remove the barriers to accessing advanced tools, thereby mitigating one of the key challenges faced by traders in this high-risk segment.