Drowning in debt at 32: confessions of a failed options trader

Here is SP (name withheld by request) who tells his story and offers valuable lessons for anyone considering entering the high-risk world of options trading:

In the last eight or nine years, I lost approximately ₹60 lakh in options trading, a loss so bad that I am now deep in debt, which is almost that amount. I owe money to 11 different lenders. I have negative net worth and no assets to sell.

My journey began in 2015 while I was pursuing an MBA in Pune. A friend introduced me to the concept of futures and options, and even the professors encouraged us to invest in the markets as a learning experience. Excited by the prospect, I opened an account with a discount broker (Upstox) and placed my first trade – a SBI call option. I made a modest profit of ₹800, but it was enough to spark a fascination that would eventually lead to financial losses.

After graduating, I started working in a bank in Mumbai with a modest salary of ₹50,000. I continued trading options to earn extra income. The bank allowed employees to borrow money at an interest rate of just 5%, up to a limit of ₹1 lakh. I saw it as an easy arbitrage opportunity – borrow at 5% and aim for a 15-20% return. But the reality of trading was far from my expectations.

As I changed jobs and my salary increased, my obsession with options trading only grew. There were times when I made money, like when I held an IRCTC put option whose value skyrocketed when an announcement caused the stock to fall. Then, I made profits on put options on Adani Group companies just before the Hindenburg report in 2023. The profits from that trade were enough to partly fund my wedding.

However, for every win, there were losses. With every loss, I dug myself a deeper hole, borrowing more to recoup the losses. I tried various trading strategies (technical analysis, market profiles, and even financial astrology and paid courses), but nothing gave me sustained profits.

The lost money is visible, but the lost time is also significant. That time could have been spent improving skills or obtaining new courses and certifications.

There are good experts whose recommendations work, but you have to follow them all without question. You can’t just listen to some of their advice, which is what I did.

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I also started borrowing money to place as margin with brokers. The financial system made it easy, especially when you have credit cards. You can pay only the minimum amount due and continue borrowing even without hurting your Cibil score. You can then use the card to pay rent for yourself or your family.

Many websites and apps allow this payment to be made for expenses such as company maintenance, office rent and deposit for buying a house. Instead, I used this money to make business transactions. I also withdrew money from my Employees Provident Fund (EPF) in order to get an advance for medical treatment.

To be consistently successful in F&O trading, your skill level must be as high as that of a top-ranked competitive exam candidate.

I now owe money to about 11 lenders, apart from friends and acquaintances. Of the lending institutions, about 3-4 major ones agreed to settle after my loans became NPA (after 90 days of default). But in the meantime there was a lot of harassment.

They called not only me but anyone they could find connected to me through my social media profile, including my employer and my spouse’s relatives. The relentless pressure pushed me to seek help from debt settlement agents, but they turned out to be scammers who only made my situation worse.

Over the past few months, I have been engaged in negotiations with lenders. So far, four out of eleven lenders have agreed to pay between 30 and 45% of the amount owed. Despite the challenges, I am hopeful. I am determined to pay off all my debts, rebuild my career, and repair my credit rating.

Lessons learned

Reflecting on my journey, here is some hard-earned wisdom:

1. Lying to family about losses and loans has a high emotional cost. The moral guilt is unbearable.

2. The lost money is visible, but the lost time is also significant. That time could have been spent improving skills or obtaining new courses and certifications.

3. Live within your means and avoid overspending financially. Leveraging your income can be a serious mistake that leads to financial disaster.

4. For continued success in F&O TradingYour skill level should be as high as that of a top-ranked competitive exam candidate (think All India Rank 100).

5. Although personal loan disclaimers often state that the money must not be used in capital markets, there is no strict control in this regard. Borrowing money for business purposes is too easy – just give a lame excuse, such as home repairs or renovations. The financial system must control this.

Mint has seen screenshots of SP’s profit and loss and loan recovery notices to verify the claims made in this story.

The SP story is a stark reminder of the dangers of F&O trading. While the lure of quick profits can be tempting, the risks are significant and the consequences can be devastating.

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