Why Options Trading Volume Fell Over 50% in FY26 After SEBI’s New Rules
Options trading became very popular in India in the last few years. Many people started hearing about it on YouTube, Instagram, Telegram, and other social media platforms. They saw people showing big profits from small market moves, which made options trading look easy.
A new person could easily think, "If other people are making money from options, maybe I can also do it." But the reality is very different. Options trading can be risky, especially for someone who does not understand how it works.
In FY26, something important happened. According to SEBI's annual report, the number of options contracts traded in India fell by about 51.5%. That is a very big fall, but what does this number actually mean?
Did half the traders leave the market? Did options trading almost stop? No. The answer is a little different.
SEBI introduced several new rules for the futures and options market. These rules changed the way people could trade. Some trades became bigger, there were fewer weekly expiry opportunities, and risk rules also became stronger.
Because of these changes, the number of options contracts being traded came down sharply. If you are completely new to the stock market, do not worry. We will understand everything from the beginning.
First, What Is the Stock Market?
Let us start with the most basic question: What is the stock market? A company can divide its ownership into many small parts. These small parts are called shares.
When you buy a share, you are buying a very small part of that company. For example, if you buy shares of a company and the share price goes up, the value of your shares may also go up. If the share price goes down, the value of your shares may also go down.
People buy and sell these shares in the stock market. But options trading is different from simply buying shares.
What Is Options Trading?
Options trading is another way of trading in the market. In options trading, you do not simply buy a company share and keep it. Instead, you trade something called an option contract.
The word "contract" may sound difficult. For now, think of it as a special trading product that follows some fixed rules. The price of an option is linked to something else, such as Nifty, Bank Nifty, or the share price of a company.
When that market price moves, the option price can also move. Sometimes option prices move very fast, which is one reason many traders find options attractive. But fast price movement can work in both directions—you can make money quickly, but you can also lose money quickly.
What Is F&O?
You may often hear the word F&O. F&O means Futures and Options. Futures and options are two types of market trading products, and they are different from simply buying normal shares.
Some people use F&O for short-term trading, while some investors may also use it to manage risk in their investments. But F&O can be risky. A beginner should not enter F&O only because it looks easy or because someone showed a big profit online.
What Does Options Trading Volume Mean?
Now let us understand another important word: volume. Volume simply tells us how much trading happened. Here, we are mainly talking about how many option contracts were traded.
Let us take a simple example. Imagine that yesterday 100 option contracts were traded, but today only 50 contracts are traded. The number of contracts has fallen by 50%, so this is a fall in trading volume.
But there is one important thing to understand. A 50% fall in the number of contracts does not always mean that the amount of money used in the market also fell by 50%. This is because the size of each contract can change.
If one contract becomes bigger, a trader may need fewer contracts than before. For example, a trader who earlier traded four contracts may now trade only two. So, the number of contracts can fall even when trading is still happening.
This point is very important when we talk about the 51.5% fall in FY26.
Why Did Options Trading Become So Popular?
There were many reasons, and one big reason was mobile trading apps. Earlier, trading looked difficult to many people. But mobile apps made buying and selling much easier, allowing a person to open an app, choose a trade, and place the order within seconds.
Another reason was that some options looked very cheap. For example, a beginner may see an option price of ₹10 and think, "It is only ₹10. I can easily buy it." But this is where many beginners get confused.
The ₹10 shown on the screen is usually the price of one unit. You normally have to buy many units together, and this group of units is called a lot. We will understand lot size in detail in a moment.
Weekly expiry also made options popular. An option does not continue forever. It has a date on which it ends, and that date is called the expiry date.
When weekly expiries were available more often, traders had more chances to take short-term trades. Social media also played a big role. People saw screenshots showing large profits and videos where an option price moved very quickly, making options trading look exciting and easy.
But a profit screenshot does not tell you the full story. You may not see the trader's losses, know how much money was used, or understand how much risk the person took.
SEBI Found That Most Individual Traders Were Losing Money
SEBI studied the results of individual traders in the equity derivatives market. An individual trader simply means a normal person trading with his or her own money. In FY25, around 91% of the individual traders covered by the study lost money after trading costs were included.
Let us understand this in the easiest way. Imagine 10 individual traders. Around 9 out of those 10 traders lost money.
That is a very high number. It became a serious concern because many people were taking frequent and risky trades, sometimes without fully understanding how much money they could lose.
Because of these concerns, SEBI introduced several new rules. The main idea was to reduce very risky trading and make the F&O market safer.
1. Bigger Contract Sizes Made Each Trade Bigger
One important change was related to the size of index F&O contracts. To understand this, you first need to understand lot size. The idea is actually very simple.
In normal shopping, you can often buy one item. For example, you can buy one pen. But options usually do not work like that.
You normally cannot buy only one unit of an option. You have to buy a fixed group of units together. That group is called one lot, and the number of units inside one lot is called the lot size.
Let us take a very simple example. Suppose one lot has 50 units and one option unit costs ₹20. You may think the trade costs only ₹20, but you need to buy 50 units together.
₹20 × 50 = ₹1,000
This means you need ₹1,000 to buy one full lot in this example. Now imagine that the size of one contract becomes bigger. The trader may need to use more money for one position, which also means the position can become bigger for the trader.
A person who earlier traded four lots may now decide to trade only one or two lots. A trader with less money may decide not to trade at all. When many people start trading fewer lots, the total number of option contracts traded also falls.
A ₹10 Option Does Not Mean the Full Trade Costs ₹10
This is very important for a complete beginner. Imagine you see an option price of ₹10 on your trading app. You may think, "This is very cheap," but you also need to check the lot size.
Suppose the lot has 50 units. Then:
₹10 × 50 = ₹500
So, the full premium for one lot would be ₹500 in this example. This is why you should never look only at the price shown for one option unit. You should also understand how many units you need to buy together.
2. Fewer Weekly Expiries Meant Fewer Chances to Trade
Every option has an expiry date. Expiry simply means the date when the option contract ends. For example, imagine you have a ticket that is valid only until Friday. After Friday, that ticket is no longer valid.
An option contract also has an ending date. Earlier, weekly expiry options gave traders many chances to take short-term trades, and some traders were especially active on expiry days.
Why? Because option prices can move very quickly near expiry. For example, an option may move from ₹10 to ₹20 in a short time, and a beginner may think, "The price doubled. This looks like easy money."
But the same option can also fall from ₹10 to ₹5 very quickly, or even lower. So, fast movement can create fast profit, but it can also create fast loss.
SEBI reduced the number of weekly benchmark index expiries available on exchanges. This meant traders had fewer expiry-day opportunities than before. Fewer opportunities can mean fewer trades, which can reduce total options volume.
3. Option Buyers Needed the Premium Money Upfront
Now let us understand another common word: premium. Premium is simply the price you pay to buy an option. Suppose an option is trading at ₹20. ₹20 is the premium for one unit.
But remember, you normally need to buy the full lot. Suppose one lot has 50 units. Then:
₹20 × 50 = ₹1,000
So, the total premium for that one lot would be ₹1,000. SEBI introduced a rule requiring the option premium to be collected upfront from buyers.
What does "upfront" mean? It simply means the required money should already be available before the trade is taken. You cannot simply take the trade first and think about the required money later.
This makes the trader more aware of how much money is being used. It can also reduce some very quick or careless trading.
4. Risk Rules Became Stronger on Expiry Days
Expiry days can be risky because many traders may be closing or changing their positions. Option prices can also move very fast on these days, so risk can become higher.
SEBI introduced stronger rules around expiry-day risk. The basic idea is simple: if a trade has higher risk, there should also be enough money or protection available to handle that risk.
These stronger rules can make very aggressive expiry-day trading more difficult. Some traders may take smaller positions, while others may take fewer trades. This can also reduce the total number of contracts traded.
5. Every Trade Has Costs
A beginner may think only about profit and loss. For example, "I bought at ₹10 and sold at ₹15. So I made a profit." But trading also has costs.
These may include brokerage, taxes, exchange charges, GST, and other charges. Suppose your trading screen shows a profit of ₹500. You may think you earned the full ₹500, but some charges still have to be paid, so the final amount you keep may be lower.
Now imagine taking 10 or 15 trades in one day. You may pay charges again and again. These small charges can become a big amount when you trade too often.
A trader may have many small profitable trades, but after all costs are included, the final profit may become much smaller. Sometimes the final result can even become a loss.
One Rule Did Not Cause the Full 51.5% Fall
This is another important point. The 51.5% fall did not happen because of only one SEBI rule. Many things changed together.
- Contract sizes became bigger.
- There were fewer weekly expiry opportunities.
- Option premium had to be collected upfront.
- Expiry-day risk rules became stronger.
- Trading costs and taxes also mattered.
- Some traders started trading less.
- Some traders may have stopped trading.
- More people became aware that many F&O traders were losing money.
So, it is not correct to say that one single rule caused the whole fall. The overall trading environment changed.
Fewer Individual Traders Participated in FY26
The number of option contracts was not the only thing that fell. The number of individual traders also came down. SEBI's FY25-FY26 study showed that individual participation in equity derivatives fell by about 20% in FY26.
Around 78.6 lakh individual traders participated during the year. There can be many reasons why some people traded less or stopped trading.
Some people may have lost money, while others may have understood that options trading was more risky than they expected. Some may not have been comfortable with bigger contract sizes, while others may simply have decided to trade less. Every trader can have a different reason.
Most Individual Traders Were Still Losing Money
Fewer traders in the market does not mean options trading became safe. SEBI's FY26 study showed that about 87.7% of individual traders in the equity derivatives segment still made losses.
Again, let us make this number easy. Imagine a group of 10 individual traders. Roughly 9 out of those 10 traders lost money.
This is something every beginner should remember. Options trading can look simple from the outside—you click buy, you click sell, and the price moves quickly. But making money regularly is much harder than it looks.
A few profit screenshots on social media do not show the full picture.
Why Social Media Can Confuse a Beginner
Imagine you open YouTube or Instagram. Someone shows a profit of ₹20,000, while another person shows a trade where ₹5,000 became ₹15,000. You may start thinking, "Everyone is making money from options."
But you are only seeing one part of the story. You may not see that person's previous losses, know how much total money the person used, understand how much risk was taken, or know how much was paid in trading costs.
You may also never see the losing days or losing months. One winning trade does not mean a person always makes money.
Social media can also create something called FOMO. FOMO means fear of missing out. It means you feel that other people are getting an opportunity and you are missing it.
For example, you see someone making a big profit and think, "I should also enter now before I miss the chance." You may then take a trade without understanding it properly.
If you lose money, you may become angry and immediately take another trade to get your money back. This is called revenge trading. It simply means taking another trade mainly because you want to quickly recover an earlier loss.
This can make the situation worse. A small loss can turn into a much bigger loss.
Why Do Options Look So Attractive?
One reason is that option prices can move very fast. Imagine an option moves from ₹10 to ₹20. The price has doubled, which can look very exciting.
A beginner may think, "If the option doubles, I can make money very fast." But the opposite can also happen. The same ₹10 option may fall to ₹5, so fast movement can help you, but it can also hurt you.
There is also something called time decay. Do not worry about the difficult name. The basic idea is simple.
An option has an expiry date. As that expiry date gets closer, the option may lose some value with time. For example, suppose you buy an option because you think the market will go up.
The market may go up a little, but if it does not move enough or fast enough, your option may still lose value. This is why options trading is not only about guessing whether the market will go up or down.
You also need to understand things like expiry, lot size, strike price, premium, timing, and risk.
Does Lower Options Volume Mean Options Are Safe Now?
No. Lower trading volume does not make options safe. Options trading can still be risky.
A trader can lose money quickly if the trade is too big. A trader can also lose more money by staying in a bad trade for too long. Buying an option only because it looks cheap can also be risky.
SEBI rules can reduce some risky activity, but rules cannot make decisions for every trader. The trader still needs to control emotions and understand risk.
What Should a Complete Beginner Learn From This?
The biggest lesson is simple: do not think of options trading as a quick-money method. First learn how it works, and do not put serious money into something you do not understand.
Before thinking about profit, first understand how much money you can lose.
Do Not Buy an Option Just Because It Looks Cheap
Suppose an option is trading at ₹5. ₹5 looks very cheap, but remember that you normally need to buy a full lot. So, first check how many units are in the lot and calculate the total amount needed.
Also think about how much of that money can be lost. A low price does not always mean low risk.
Do Not Take a Trade That Is Too Big
Imagine you have a certain amount of money for trading. If one bad trade can create a loss that makes you panic, the trade may be too big for you.
Taking a smaller position can make risk easier to manage. It can also help you make calmer decisions.
Understand That Losing Trades Will Happen
No trading method works every time. Even experienced traders have losing trades, so you cannot expect every trade to make money.
The important thing is to stop one small loss from becoming a very large loss.
Do Not Rush to Recover a Loss
Suppose you lose ₹2,000. You may think, "I need to get my ₹2,000 back right now." This thinking can be dangerous.
You may take another trade without proper Option Research. If that trade also loses, you may take an even bigger trade. This is how a small loss can become a big problem.
You do not have to recover a loss immediately.
You Do Not Need to Trade Every Day
The stock market opens on almost every working trading day, but that does not mean you must trade every day. Sometimes there may be no good trade.
In that situation, doing nothing can be better than taking a bad trade. There will be another trading day.
Simple Questions to Ask Before an Options Trade
Before taking a trade, ask yourself:
- Do I understand what I am buying?
- Why am I taking this trade?
- How much money am I using?
- How much money can I lose?
- Is this trade too big for me?
- When will I exit if the trade goes wrong?
- Am I trading only because I saw someone else making money?
- Am I trying to recover an earlier loss?
- Do I know when this option expires?
- Do I understand the total cost of the trade?
If you cannot answer these questions clearly, it may be better not to trade yet. There will always be another opportunity.
Will Options Trading Volume Increase Again?
Nobody knows for sure. Trading volume can go up or down in the future. It can change because of new SEBI rules, market conditions, trading costs, taxes, and changes in trader behaviour.
Options will continue to be used in the Indian market, but the way people trade them can keep changing. For a complete beginner, future options volume is not the most important thing to worry about.
Understanding how options work is more important. Understanding how much you can lose is even more important.
The Biggest Lesson Is About Risk
SEBI can change market rules, increase contract sizes, reduce weekly expiries, and make risk rules stronger. But every trader still has to control his or her own decisions.
A trader still needs to control greed and fear, avoid revenge trading, and know how much money can be lost. Good trading is not only about finding the right time to buy.
It is also about knowing when to stop and keeping losses under control. Sometimes, the best decision is not to take a trade at all.
Conclusion
Options trading volume fell by about 51.5% in FY26. But this does not mean that half of the options market simply disappeared. The number mainly shows that fewer option contracts were traded.
Many changes happened together. Contract sizes became bigger, there were fewer weekly expiry opportunities, risk rules became stronger, and option premium had to be collected upfront.
Some people also reduced their trading or stopped trading. All these changes helped reduce the number of contracts being traded.
But one important thing did not change: options trading is still risky. SEBI's FY26 study showed that most individual traders covered by the study were still losing money.
So, if you are completely new to the market, do not rush into options because you saw someone showing a big profit online. First understand what the stock market is, then understand what an option is.
Learn what a lot means, what premium means, and what expiry means. Most importantly, learn how much money you can lose.
Do not start by asking, "How much money can I make?" First ask, "How much money can I lose if I am wrong?"
And remember one very simple rule: You do not have to trade every day.
Before trying to make money from options, first understand what you are trading and how much money you can lose.
