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Risk on Derivatives

Derivative instruments, including Futures and Options (F&O), involve a high degree of risk and may not be suitable for all investors. Investors should carefully understand the nature of derivatives and the associated risks before trading. This page outlines the key risks relevant to derivative-related research published by We Capitalize (Gowtham Kumaresh, SEBI Registered Research Analyst, INH000028981).

Last Updated: Oct 2026 · SEBI RA Reg. No. INH000028981 · Per SEBI (Research Analysts) Regulations, 2014

Contents

1. Key Risks 2. SEBI Investor Advisory 3. Research Disclaimer 4. Investor Responsibility 5. Regulatory Disclosure

Please Note: We Capitalize is a brand name and does not represent a separate legal entity. All research services are rendered by Gowtham Kumaresh, SEBI Registered Research Analyst, Registration No. INH000028981.

Mandatory Risk Warning

Investment in securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, enlistment with BSE and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.

1. Key Risks of Derivatives Trading

The following risks are inherent to trading derivative instruments such as Futures and Options. This list is not exhaustive — derivative trading involves additional risks specific to individual products, market conditions, and trading strategies.

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Leverage Risk

Derivatives provide leveraged exposure. Small movements in the underlying asset can result in significant gains or losses relative to the capital deployed.

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Loss Risk

Trading in derivatives can result in substantial losses. In certain situations, losses may exceed the initial margin deposited.

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Time Decay Risk

Options are time-sensitive instruments. Option buyers may lose the entire premium paid if the expected market movement does not occur before expiry.

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Volatility Risk

Unexpected market events and rapid price fluctuations can significantly impact derivative positions, sometimes unfavourably and without warning.

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Liquidity Risk

Certain contracts may experience lower liquidity, making it difficult to enter or exit positions at desired prices or at all.

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Gap Risk

Markets may open significantly higher or lower due to overnight developments, resulting in losses beyond anticipated or stop-loss levels.

2. SEBI Investor Advisory

As per SEBI's 2024 study on individual traders in the equity Futures & Options segment (covering FY22–FY24), 93 out of 100 individual F&O traders incurred net losses. The average net trading loss of loss-making traders was approximately ₹1,10,000. Transaction costs significantly impacted overall profitability — even among traders who recorded gross profits.

SEBI Study Finding

As per SEBI's 2024 study, 93 out of 100 individual F&O traders incurred net losses during FY22–FY24. The average net trading loss was approximately ₹1,10,000. Investors are advised to carefully assess their financial situation, investment objectives, and risk tolerance before participating in derivatives trading.

3. Research Disclaimer

Any derivative-related research, analysis, market commentary, or recommendations provided by We Capitalize:

  • Are subject to market risks and do not account for individual investor circumstances.
  • Do not assure or guarantee profits or returns of any kind.
  • May not be suitable for every investor, depending on their financial situation, risk appetite, and investment objectives.
  • Should be independently evaluated and verified before acting upon, and should not be construed as investment advice.
  • Are based on information and analysis available at the time of publication and may become outdated without notice due to rapidly changing market conditions.

4. Investor Responsibility

Before trading derivatives, investors should take the following steps to protect themselves:

  • Understand the product — Fully understand the structure, mechanics, and associated risks of the derivative instrument before trading.
  • Use appropriate risk management — Apply position sizing, stop-loss orders, and other risk management practices suited to your risk tolerance.
  • Trade only with affordable capital — Never trade derivatives with capital you cannot afford to lose entirely.
  • Seek professional advice — Consult a qualified financial or investment professional where necessary before making trading decisions.

Any decision to act on derivative-related research is solely the responsibility of the investor. We Capitalize shall not be held responsible for any investment or trading decision, profit, loss, or consequence arising from the use of its research, recommendations, or market commentary relating to derivatives.

5. Regulatory Disclosure

Registration granted by SEBI, enlistment with BSE and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.

Research Analyst Gowtham Kumaresh
Brand Name We Capitalize
SEBI Reg. No. INH000028981
BSE Enlistment No. 7367
Type Individual Research Analyst
Validity Jul 17, 2026 - Perpetual (subject to compliance)
Regulation SEBI (Research Analysts) Regulations, 2014
NISM Certification NISM Series XV — Research Analyst
Supervisory Body RAASB — BSE Administration & Supervision Ltd.
Registered Office Door No: 3/385/JL, Ward No: 3, Vijayapuram Street, Chinnakalayamputhur Village, Palani – 624615, Tamil Nadu, India
Email contact@wecapitalize.in
Contact No. +91 70100 67041
Verify Registration sebi.gov.in — Intermediary Search ↗
SEBI Registered Research Analyst

We Capitalize (Gowtham Kumaresh, INH000028981) is registered with SEBI as a Research Analyst under the SEBI (Research Analysts) Regulations, 2014, and operates strictly within the scope of research services as defined thereunder. We do not provide investment advisory, portfolio management, execution, or distribution services.

This page is prepared in accordance with the SEBI (Research Analysts) Regulations, 2014, and the SEBI Master Circular for Research Analysts dated February 6, 2026 (Ref: HO/38/12/11(1)2026-MIRSD-POD/I/4360/2026). It is subject to periodic revision in line with regulatory updates. We Capitalize — Gowtham Kumaresh, SEBI Registered Research Analyst, Reg. No. INH000028981. For any clarification regarding this document, please contact us.
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