A few years ago, I got talking to a young Uber driver during a ride. He was friendly and curious, and when he learned that I worked with money, he told me, with real excitement, that he was making a lot of money buying options.
He explained it the way a person explains a discovery. You put in a small amount, the price moves, and sometimes you get many times your money back in a day. He had already done it several times.
I did not argue with him. I was glad that he was interested in markets at all. But the conversation stayed with me, because I could not tell how it would end.
I believe that taking part in the markets is one of the best forms of live education available to anyone. I have written about this, and I stand by it. But I have also seen what happens when the education turns into a chase. The chase has a name, and it is the second half of the fear-and-greed pair. In an earlier article I wrote about fear and why investors sell at the bottom. This one is about greed, and how it plays out in trading and in investing.
Where I stand
Let me be clear, because this subject is easy to misread. I am not against trading. I trade derivatives myself, and I believe that putting real money into uncertain outcomes teaches things that no book or course can. It teaches you how you behave when you are afraid, when you are euphoric and when you are wrong. Markets are the one place where anyone, whatever their job or background, can practise making real decisions with real consequences.
Nor am I against futures and options. They were created to let people hedge a portfolio or lock in a price, and they bring the liquidity that keeps prices closer to real values. A market without a functioning derivatives segment would be less efficient.
My concern is something narrower. It is what happens when the wish for quick money takes charge, when position sizes stop being sized to the person and start being sized to the dream. Trading is a fine teacher as long as the tuition is affordable. The trouble begins when greed makes the tuition unaffordable.
Two conditions make all the difference. F&O needs to be sized correctly, and it needs to be kept separate from long-term capital. Nearly everything that goes wrong starts when one of those is ignored.
What the numbers tell us
The Securities and Exchange Board of India has studied this carefully, and the findings are worth knowing.
In its study for FY25, SEBI found that more than 91 per cent of individual traders in equity derivatives lost money, and that their total net losses rose to about Rs 1.06 lakh crore, up from about Rs 75,000 crore the previous year. The latest study, for FY26, shows a small improvement but a similar picture. About 87.7 per cent of individual traders ended the year in the red, with total losses of about Rs 91,685 crore and an average loss of about Rs 1.17 lakh per trader.
Some details are telling. Options accounted for around 92 per cent of the losses, and most individual traders were option buyers. About 59 per cent of index options turnover took place on expiry day. The more a trader traded relative to his capital, the more likely he was to lose. Younger, lower-income traders with small portfolios traded the most aggressively relative to their resources. And of those who lost money for two years in a row and kept trading, about 90 per cent lost again in the third year.
I read these numbers as a lesson in how to trade, and not as a verdict on whether to trade. They show what happens when intensity is too high, positions are too large, expiry-day excitement takes over, and losses are chased. These are problems of size and behaviour, and both can be learned and controlled. But an average loss of over a lakh of rupees is a heavy tuition fee for a young person with a modest income. That is why the discipline matters.
How we got here
The sharp rise in participation after 2020 had several causes, and not all of them were bad. When the pandemic locked people at home, many had time and a laptop, and trading became something you could do from a phone. That is a genuine democratisation. At the same time, advice about creating additional income streams was everywhere, and much of it made the markets sound like a side job anyone could do after a short course.
The government and the regulator have tried to respond. The Securities Transaction Tax on derivatives was raised in Budget 2024, and the Budget of February 2026 proposed a further increase, to 0.15 per cent on options premium and 0.05 per cent on futures. SEBI has also tightened rules on contract sizes and expiries, and the number of active individual derivatives traders fell by about a fifth in FY26. But a tax raises the cost of trading. It does not change why people overtrade, and that reason lives inside us.
Why the lure is so strong
To understand the forms that greed takes, it helps to see why it is so powerful. Much of it is simple human nature.
First, we overvalue small chances of large rewards. People will pay more than the arithmetic justifies for a ticket that offers a small probability of a big win. An option that costs a small amount and might multiply many times is, in effect, a lottery ticket that looks like a financial product.
Second, markets deliver rewards unpredictably, which is the same pattern that makes slot machines so compelling. When you do not know when the next win will come, you keep checking. A single large win, in the early days, can plant a belief that lasts for years.
Third, the lure is strongest for those who most need the money. It is not a coincidence that younger, lower-income traders with small portfolios traded the most aggressively. When you feel that your salary will never take you where you want to go, a product that promises a shortcut is attractive. I do not look down on the young driver for this. If anything, I understand it. It is a human response to a real pressure.
Greed is not only for traders: the lure of the peak
It would be a mistake to think that greed lives only in the derivatives segment. Some of the most expensive episodes in market history involved ordinary investors buying shares, with no leverage at all.
The best-known is the technology bubble of the late 1990s. As the internet took off, investors became convinced that traditional measures of value no longer applied. Companies with no profits, and sometimes almost no revenue, saw their share prices climb to extraordinary levels because they had a ".com" in their name. The justification was always the same: this time is different, the old rules belong to the old economy, and anyone who questioned the prices simply did not understand the new world.
The Nasdaq Composite peaked at over 5,000 in March 2000. Over the next two and a half years, it fell by roughly three quarters. Many of the companies that had been celebrated were gone within a few years. An online pet-supplies company that raised money in a much-publicised public offering in early 2000 was shut down before the year ended. It took the Nasdaq about fifteen years to regain its old peak. India felt the same shock, as technology stocks that had risen sharply in 1999 and early 2000 fell heavily and dragged the wider market with them.
The remarkable thing about that period is that the technology itself was real. The internet did change the world. The investors were right about the story and wrong about the price. A great business bought at an absurd valuation can still be a terrible investment, sometimes for a decade or more.
This is greed in its most respectable form. It does not feel like gambling. It feels like being early to the future. The investor is not sizing a bet, he is following the crowd, and the crowd looks very clever. He buys because the price has risen, and the price rises because others are buying, and nobody stops to ask what the business actually earns.
The same pattern appears in smaller forms in almost every cycle: a fashionable sector, a hot new listing, a smallcap stock that has tripled in a few months. The signs are familiar. Valuations that need perfect growth for many years to make sense. Stories that matter more than numbers. People buying because their neighbour is buying.
Sir John Templeton is often quoted as saying that the four most dangerous words in investing are "this time it's different." I find that warning has aged well.
The many faces of greed
Greed does not always look like greed. It often shows up as ambition, confidence or diligence. Here are the forms I see most often.
The lottery mindset. This is the Uber driver's version. The aim is not to build wealth over time but to turn a small amount into a large one, quickly. Out-of-the-money options, penny stocks, new listings and speculative tokens all appeal to this instinct. The odds of winning are low and the cost, repeated over months, is high. But because each bet is small, it never feels dangerous.
Herd greed. This is the dot-com pattern: buying because everybody is buying, without studying the business or the price. It feels safe, because you are in good company. It is the most common form among long-term investors, and it is often the most costly, because the amounts are larger.
Overtrading. For many people, trading becomes an activity and not a strategy. They trade because the market is open or because sitting out feels like missing something. More activity means more costs and more decisions made under emotion, and SEBI's data links trading intensity to higher losses.
Excess leverage. Derivatives let you control a large position with a small amount of money. That is useful for hedgers and dangerous for the greedy. The trader who thinks, "If I can make ten per cent on this, why not take ten times the position?" has forgotten that the same multiplier works in the other direction.
Picking up pennies. This is the greed of the option seller. Selling options can look safe, because you collect a premium and win most of the time. For months, the account grows steadily. Then one unexpected move wipes out everything. Some strategies earn small, regular gains for a long time and then lose it all at once.
Revenge trading and doubling down. After a loss, many people try to recover it fast. They increase the size, take riskier trades and ignore their own rules. It is a mixture of fear and greed: the fear of the loss and the greed to erase it.
Overconfidence after wins. A few successful trades, particularly in a rising market, can create the illusion of skill. The trader increases his size and relaxes his rules. This is often called the house-money effect: money won in the market feels less real than money earned, so it is risked more freely. Nassim Taleb's phrase for this is being fooled by randomness, which means mistaking a lucky run for skill.
Not booking profits. Greed is not only about getting in. It is also about refusing to get out. A trader with a good profit tells himself it will go further, moves his target, and watches the gain shrink and disappear. Wanting the whole of the move, and not just a good part of it, has cost many people their gains.
Chasing tips and shortcuts. Hot tips on messaging groups, courses that promise a secret strategy, and advisers who guarantee returns all appeal to the same wish, that there is an easy way. SEBI has repeatedly warned against unregistered advisers and promises of assured returns. If someone guarantees a high return with little risk, that is almost always the danger sign.
How to keep greed in check
Greed cannot be eliminated, because it is part of our wiring. But it can be managed, the same way a ship's crew manages the dangers of the sea: with rules set in advance, a clear understanding of limits, and discipline that does not depend on mood. Here are the practices I find most useful.
For trading
Keep trading capital separate from long-term capital. This is the most important rule. Decide on an amount you can afford to lose entirely without affecting your family's security, your retirement or your children's education. Put it in a separate account and treat it as tuition money. If it is lost, stop, and do not top it up from your savings.
Size every position to your risk, not to your hopes. Decide in advance how much of your trading capital you are willing to lose on any one trade. A common rule of thumb is a small fraction, often one or two per cent. The exact number matters less than having one and sticking to it. Most blown-up accounts did not fail because of one bad idea. They failed because one position was too large.
Write the rules before you trade, and follow them. In my own automated workflow, the rules include a mandatory stop loss on every trade, limits on position size, a maximum number of open positions, a daily loss limit, and a simple principle: if there is no rule for it, there is no trade. The value of such a framework is that it was written when I was calm. A rule written in the heat of a trade is usually a rationalisation.
Prefer defined risk. If you trade options, favour structures where the maximum loss is known in advance. Be very careful with strategies that sell options without protection, however steady the premium looks.
Be wary of the expiry-day rush. More than half of index options turnover happens on expiry day. If you cannot explain why you are trading that day, other than excitement, sit it out.
Pay yourself. When a trading account makes profits, take out a fixed share on a regular basis and move it to your long-term investments. This turns paper gains into real ones and limits the damage if greed leads you to give them back.
Measure your process, not just your profit. At the end of each week, ask whether you followed your own rules. A profitable week in which you broke the rules is a warning, and a losing week in which you followed them is often a good one. Keep a journal of why you took each trade.
For investing
Understand what you own. Before buying a share, you should be able to explain in a few sentences what the company does, how it makes money and why it should keep doing so. If the explanation is only that the price is going up, you are following the herd.
Look at the price as well as the business. A good company is not a good investment at every price. Compare the valuation with the earnings, the growth and the history of the company and its sector. The tech bubble taught that being right about the story does not protect you from paying too much.
Be most careful when everyone agrees. When a theme is on every channel and every conversation, the opportunity is probably already in the price. Warren Buffett's well-known advice, to be fearful when others are greedy and greedy when others are fearful, is easy to quote and very hard to follow.
For the person
Ask the salary question. If you are tempted to treat trading as a replacement for your income, ask whether you would be comfortable relying on it for your household's essential expenses. If the answer is no, it is not income. It is a risk, and it should be sized as one.
Watch for the warning signs. If you find yourself borrowing to trade, hiding your losses from your family, trading to recover what you lost, or feeling unable to stop, these are signs of something closer to compulsion. The right response is to pause and seek help, from a trusted person or a professional, before it gets worse.
Why the discipline is worth it
Controlling greed does not mean giving up on wealth. It is how wealth is actually built.
The investors who do well over decades are rarely those who found a clever shortcut. They stayed in the game, protected their capital and let steady returns compound. Greed attacks exactly that, by removing us from the game before compounding has a chance to work.
I tend to think about this in terms of what I learned in the Navy. A submarine has a safe operating depth, set by its designers, and the crew is trained never to go looking for the limit just to prove a point. The sea does not reward bravado. It rewards people who know their boat's limits and respect them. In the markets, the equivalent limits are your capital, your time horizon and your temperament, and the people who last are the ones who respect all three.
A closing thought
I think often about the young driver. If I could say anything to him now, it would not be to stop, because trading is a wonderful teacher. I would say: keep this money separate from the rest of your life, size it so that no single bet can hurt you, and treat the early wins with suspicion rather than celebration.
Fear makes us sell at the bottom. Greed makes us buy at the top and risk too much along the way. The answer to both is the same: a plan made in calm, a size you can live with, and a clear separation between the money that builds your future and the money you are using to learn.
The markets will always be there to teach us. The question is whether we are still around, with our capital intact, to learn the lesson.
Disclaimer: This article reflects personal views and experience for educational purposes only. It is not investment advice, and it is not a recommendation to buy or sell any security or to trade in derivatives. Trading in futures and options carries a high risk of loss, and SEBI's studies show that most individual derivatives traders lose money. Please consult a qualified financial planner or adviser before making investment decisions.