How Transaction Costs Affect Option Traders: What SEBI’s ₹25,000 Crore FY26 Data Reveals
When people start option trading, they usually think about only two things:
How much can I make?
And:
How much can I lose?
But there is one more thing that can slowly reduce a trader's money. That is the cost of trading.
Every time you take a trade, there can be some charges. One trade may not cost much, but if you keep buying and selling options again and again, these small costs can become a large amount.
SEBI's latest FY26 study shows how important this can be. Individual traders paid around ₹25,000 crore in transaction costs during FY26. SEBI also found that around 87.7% of individual traders trading in futures and options lost money during the year.
There is another important number. From FY22 to FY26, individual traders paid around ₹1 lakh crore in transaction costs.
These are very large numbers. But what exactly is a transaction cost, and how can it affect someone who is trading options with a small amount of money?
Let's understand it in very simple words.
First, What Is a Transaction Cost?
A transaction cost is simply the money you pay because you are taking a trade. Suppose you buy an option. You may have to pay brokerage, taxes and some other charges.
When you later sell that option, there can again be charges. So your real result is not only based on the price at which you bought and sold the option. The cost of taking the trade also matters.
For example, suppose you make ₹500 from a trade before costs. If the total cost of that trade is ₹50, you do not actually keep the full ₹500.
Your result after that cost is:
₹500 - ₹50 = ₹450.
This is a very simple example. Actual charges can be different depending on the trade and broker, but the basic idea is the same.
Trading has a cost.
What Are You Paying For?
There is not just one charge in trading. There can be different types of costs, and one of them may be brokerage.
This is the fee your broker may charge for the trade. There are also taxes and other market charges.
One important tax is called STT, or Securities Transaction Tax. This is a tax that applies to certain trades in the stock market.
You don't need to remember all the names when you are first learning. The important thing to understand is simple: when you keep taking trades, you also keep creating trading costs.
Why Is ₹25,000 Crore Important?
SEBI found that individual traders paid around ₹25,000 crore in transaction costs in FY26. Think about what this number tells us.
A small cost on one trade may not look dangerous. But millions of traders taking many trades can create a very large total cost. The same thing can happen to one trader on a much smaller level.
Suppose your average total trading cost is ₹40 for one complete trade. If you take one trade, the cost is only ₹40.
But suppose you take 10 such trades:
10 × ₹40 = ₹400.
If you take 20:
20 × ₹40 = ₹800.
The more you trade, the more important these costs can become. The ₹40 number here is only an example. Your actual cost can be higher or lower.
A Profitable Trade Can Become Less Profitable
Suppose you buy an option and later sell it for a profit. Your trading profit before costs is ₹1,000, so you may feel that you made ₹1,000.
But suppose the total cost of the trade is ₹100. Your result after that cost becomes:
₹1,000 - ₹100 = ₹900.
You still made money, but you made less than the price movement alone may show. Now imagine doing this again and again. The difference can become much bigger over many trades.
This is why traders should not look only at profit before charges. They should also understand what remains after trading costs.
A Small Profit Can Become Even Smaller
Transaction costs become even more important when the profit on a trade is small. Suppose you make ₹100 before costs, but your total cost is ₹60.
Your actual result is only:
₹100 - ₹60 = ₹40.
You were right about the trade, and the trade made money before costs. But a large part of that money went towards the cost of trading.
Now suppose your profit before costs is only ₹50 and your total cost is ₹60.
After costs:
₹50 - ₹60 = -₹10.
The trade looked profitable before costs, but after costs, you actually lost money. This is why very small profits can be difficult when someone is trading very frequently.
Costs Also Make Losing Trades Worse
Transaction costs do not disappear when you lose money. Suppose you lose ₹500 on an option trade. You may think your total loss is ₹500.
But suppose the trade also has ₹50 in total costs. Your result becomes:
₹500 + ₹50 = ₹550 loss.
The trading loss was ₹500, but your money went down by ₹550 after the cost is included. Now imagine this happening many times.
A trader may have several losing trades during the day, and each trade can bring another cost. This can slowly make the total loss bigger.
Frequent Trading Can Make Costs Add Up Fast
This is one of the biggest lessons from the data. Taking more trades means paying trading costs more often.
Suppose Trader A takes two trades in a day, while Trader B takes 20 trades. Even if their cost per trade is similar, Trader B may pay much more in total because the trader is entering and exiting the market again and again.
This is especially important in option trading. Some traders buy an option, sell it after a few minutes and then quickly enter another trade. They may repeat this many times during the day.
Every new trade may look like a new chance to make money, but it can also mean another cost.
Why Expiry-Day Trading Matters
SEBI's FY26 data also showed that a lot of option trading happened close to expiry. Expiry is simply the date when an option contract ends.
Around 59% of index options turnover happened in contracts expiring on the same day. Here, turnover simply means the total trading activity in these options.
In simple words, a large part of index option trading was happening in options that were going to expire that same day. Around 75% of this trading activity happened in contracts expiring within one day, while around 97% happened in contracts expiring within one week.
Why are traders attracted to options close to expiry? One reason is that some of these options can look cheap. Their prices can also move very quickly.
For example, a trader may see the price of an option move from ₹20 to ₹25 or ₹30 and hope to benefit from that price movement. But the price can also quickly fall to ₹10, ₹5 or even close to zero.
The actual profit or loss from such a trade depends on factors such as the quantity traded and the costs involved. If someone keeps entering and exiting these options throughout the day, transaction costs are also being created again and again.
Lower Trading Did Not Make Costs Fall Much
There was another interesting finding in SEBI's data. Trading activity became lower during FY26, but total transaction costs stayed broadly around the same level.
SEBI said one reason was the increase in Securities Transaction Tax, or STT, which became effective from October 1, 2024.
In simple words, traders were doing less trading than before, but their total costs did not fall by the same amount. This shows why traders should not ignore taxes and charges when looking at their trading results.
Most Individual Traders Were Already Losing Money
Transaction costs become even more important when we look at another number from the SEBI study. Around 87.7% of individual traders trading in futures and options lost money during FY26.
Together, these individual traders had a net loss of around ₹91,685 crore. Net loss here means the overall loss after profits and losses are considered together.
SEBI also found that around 92% of the total losses came from options trading.
This does not mean transaction costs caused all these losses. A trader can lose money because the market moves against the trade, but transaction costs can make the final result worse.
If you are already losing ₹1,000 from your trades and also paying ₹100 in costs, your money is going down by more than the trading loss alone. That is why costs should be treated as part of trading risk.
Why Beginners Can Easily Ignore Trading Costs
Beginners often focus on the option price. Suppose an option is trading at ₹20. A beginner may think:
“If the option price goes up, I may be able to make money.”
But the trader should also remember the costs involved in entering and exiting the trade. This becomes even more important when the expected profit is very small.
If you are trying to make a small amount from every trade, the cost of each trade can take away part of that profit. And if you keep taking trades after losses, the costs continue to add up.
More Trades Do Not Automatically Mean More Profit
It is easy to think:
“If I take more trades, I will get more chances to make money.”
But there is another side. More trades also mean more chances to lose money, and they usually mean more transaction costs.
Suppose one trader takes five carefully planned trades in a week. Another trader takes 50 trades without a clear plan.
The second trader does not automatically have a better chance of making money just because more trades were taken. The trader is also paying costs again and again.
This is why the number of trades should never be confused with the quality of trades.
What Can an Option Trader Learn From This Data?
The lesson is not that every trading cost is too high. The lesson is that small costs should not be ignored.
Before taking a trade, understand how much you may have to pay in brokerage, taxes and other charges. After the trade, look at your result after all costs.
If you trade frequently, check how much you are paying over a week or a month. You may be surprised by the number.
Also ask yourself a simple question before taking another trade:
“Am I taking this trade because I have a proper reason, or am I trading only because I want to stay in the market?”
That small question can be very useful.
Final Thoughts
SEBI's FY26 data gives option traders an important lesson. Individual traders paid around ₹25,000 crore in transaction costs during the year. Over FY22 to FY26, the total was around ₹1 lakh crore.
These numbers show how small trading costs can become very large when trading happens again and again. A profitable trade can become less profitable after costs, while a very small profit can sometimes disappear after costs. A losing trade can also become an even bigger loss.
This matters even more in option trading because many traders take short-term trades and enter and exit the market several times.
So before taking a trade, don't think only about:
“How much can I make?”
Also think about:
“How much can I lose, and how much will this trade cost me?”
Trading costs may look small on one trade. But over hundreds of trades, small costs may no longer be small.
Small trading costs may not look important on one trade, but they can add up quickly when you trade again and again. Trade with a clear reason, understand your costs, and focus on the quality of trades instead of the number of trades.
