Future and option trading: Will the government ban these trading activities to protect investors from financial ruin?

The number of individual investors participating in Future and Options (FO Trading) is growing quickly. Unfortunately, 9 out of 10 of these investors are experiencing significant losses, with some even losing their entire life’s savings. To address this concerning trend, financial regulators are putting together a committee to evaluate the risks associated with derivative markets such as futures and options trading. This committee will then recommend changes to policies in order to better protect investors.

In recent times, there has been a sharp rise in the trend of investing in derivatives markets. Many people flock to these markets with the hopes of striking it rich quickly, only to end up losing all their savings.

Many market experts believe that trading in derivatives like futures and options (F&O trading) is similar to gambling. According to the market regulator SEBI, 9 out of 10 investors who engage in F&O trading end up losing all their money and going bankrupt.

According to sources cited by news agency Reuters, financial regulators such as SEBI and RBI have come together to set up a committee. This committee’s main goal is to analyze the growing risks associated with investing in the derivatives market. They will investigate cases of substantial losses suffered by investors and may recommend changes to existing policies if deemed necessary.

In the past five years, the popularity of option trading has surged significantly. Retail investors, in particular, are increasingly putting their money into this form of investment. According to the National Stock Exchange (NSE), the value of options trading is projected to reach $907.09 trillion in 2023-24, more than two times the previous year’s value. This rapid growth has prompted government institutions to feel the need for closer monitoring of option trading activities.

The committee will look into the potential risks of trading derivatives systematically. They will also recommend ways to safeguard investors’ interests and enhance regulatory oversight. Another focus will be to investigate any link between the rise in individuals taking out small unsecured loans and engaging in options trading. This investigation aims to ensure that people are not using personal loans or credit card funds for options trading.

People are feeling even more worried because banks are not even asking customers why they need a personal loan. The Reserve Bank’s data shows that the number of personal loans being taken out is going up by over 20% each year.

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