Understanding Common Mistakes in Futures and Options Trading
Futures and options trading are preferred by most people because of easy control over a big position with a small capital investment. However, when combined with volatility and expiry pressures, the same choices can have big losses.
A SEBI study showed that 93 percent of individual F&O traders lost around ₹1.8 lakh crore between FY22 and FY24. Another report mentioned that 91 percent of traders in FY25 also ended in losses with similar patterns.
The majority of these might have been avoided if people had remained aware of common mistakes in F&O trading.
Misreading Lot Size and Contract Value
The majority of investors start futures and options trading without evaluating the actual contract value. A single lot size may look small, but it can result in a real loss of gain.
| Index/Stock | Lot Size | Approx. Contract Value |
| Nifty | 75 | 75 x price |
| Bank Nifty | 35 | 35 x price |
Underestimating Time Decay Near Expiry
With time decay acceleration, the maximum pressure on the option traders happens to be in the last few days before expiry. Unless the price makes a quick positive movement, the premium keeps getting lower.
Moreover, even if the market price moves slowly in your favor, the options can face a drop in value with theta speeding up near the end.
Not Checking Implied Volatility (IV) Before Entering Trades
Even implied volatility has a direct impact on the option prices, but not all people tend to check it.
With a purchase in high implied volatility, the option price gets costlier. On the other hand, when IV is lower, the options experience minimal or no big moves.
Premium will not drop down too low while selling in the low implied volatility. This is the reason we see the variations in pricing, while premiums remain almost flat.
Treating Weekly Expiry Like Normal Trading
Weekly expiry is far different from a very normal trading day, as option premiums go down in the final hour.
In case you start the trade late, there won’t be enough time for the premium to retain its value. This happens even when the price moves in your favor.
Misreading Open Interest Signals
The Open Interest warning should be read properly while checking the price and volume.
Seeing more OI doesn’t always mean a strong direction, but sometimes it can be because people take hedging or neutral positions.
Over-Relying on Stop-Loss Orders in Gap Markets
Stop-loss orders are useful in the normal market scenario but aren’t completely reliable during gaps.
In case of any immediate gap-up or gap-down, the price can jump over the level, leading to an exit at the worst price.
Choosing Options Only by Premium Price
Another common mistake is to choose the option because of the cheap premium.
Such options can have a low delta (it won’t move with stock price changes) or a very jumpy gamma (it will move unpredictably).
Following Unverified Trade Calls
Simply following trade insights from social media or groups leads to wrong results.
Such decisions miss the risk level of original traders, capital size, and other reasons.
Entering Trades Without an Exit Plan
Many traders start trading without setting the target (profit) or loss levels. Without a proper exit plan, the people might have to stick to losing stocks in the hope of future profits.
Trading Illiquid Stock Options
Trading options that are illiquid (not traded very often) is risky and may lead to poor entry or exit prices. Even small changes in buying and selling prices can impact your final profits or losses.
Holding Options Till Expiry Without Checking STT Impact
If you hold In-The-Money (ITM) options until the very last minute of expiry, they can be hit with a high Securities Transaction Tax (STT). This is the reason that investors see a drop in profits due to taxes.
Common Mistakes vs. What Actually Happens
| Mistake | What Usually Happens |
| High IV buying | Premium stays high even if price moves |
| Weekly expiry entries | Premium melts faster than expected |
| Illiquid options | Wide spreads increase hidden costs |
| Gap markets | Stop-loss levels get skipped |
Conclusion
Hence, there are certain mistakes, such as leverage, volatility, and expiry pressure, impacting the future and options trading. With proper knowledge, you can avoid such usual mistakes and invest with clarity or confidence.
For More Information: Download Stockyaari App Now
Standard warning: “Investment in securities market are subject to market risks. Read all the related documents carefully before investing.” Disclaimers: a. “Registration granted by SEBI, enlistment as RA with Exchange and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.” b. “The securities quoted are for illustration only and are not recommendatory.”
This analysis is for informational purposes only. Please consult a SEBI-registered financial advisor before investing.
– Chandan Pathak
Equity Research Analyst, StockYaari