A STUDY ON RETAIL INVESTOR BEHAVIOR IN DERIVATIVES MARKETS: ANALYSING M OTIVATIONS, OBJECTIVES, AND THE EFFICACY OF FUTURES AND OPTIONS TRADING

Abstract

Investor is the king of derivative market. The motivations, investment goals, and perceived effectiveness of futures and options (F&O) trading are the main topics of this study, which investigates how retail investors behave in the derivatives market. Primary data was gathered using structured questionnaires from 105 retail investors who were actively involved in derivatives trading as part of a quantitative research design. To determine how these elements affect participation and decision-making in F&O markets, the study examines important variables like risk tolerance, return expectations, financial literacy, and trading experience. To find important patterns and relationships, statistical tools were employed. The majority of retail investors, with differing levels of awareness regarding related risks and market volatility, trade derivatives for short-term gains and portfolio hedging, according to the findings. It is revealed that speculative motives dominate retail participation, while financial literacy and strategic risk management remain limited. Futures are often perceived as high-risk, high-reward instruments, whereas options are preferred for their flexibility and defined downside. The study also finds that there is a knowledge gap regarding complicated financial instruments, which frequently results in less-than-ideal investment decisions. The findings are intended to provide guidance to brokers, legislators, and educational institutions in order to improve investor protection and knowledgeable involvement in India's expanding derivatives market.