Case studies: when F&O went badly wrong

Each story below is real, with the real chart. Each one teaches a single lesson worth more than any formula.

1. Oil below zero - April 2020

In spring 2020, lockdowns had crushed demand for fuel and oil storage was filling up fast - especially at Cushing, Oklahoma, the delivery point for the main US oil future, WTI. The May contract expired on 21 April, and it is physically settled: whoever still holds it at the end must actually take barrels of oil at Cushing.

Many holders were financial traders and funds with no tanks and no way to receive oil. With storage nearly full, they had to get out before expiry at almost any price - and on 20 April the price went through zero to −$37.63. The June contract, a month further away, settled around $20 the same day. Oil wasn't worthless; that contract, that week, was a liability.

2. One trader, one bank - Barings, 1995

Barings was Britain's oldest merchant bank - 233 years old. In its Singapore office a young trader, Nick Leeson, was taking huge positions in Nikkei 225 futures, effectively betting that Japan's market would hold above about 19,000. Weak controls let him both trade and check his own trades, and he hid growing losses instead of closing them.

On 17 January 1995 the Kobe earthquake hit Japan and the Nikkei fell sharply. Instead of cutting the position, Leeson added to it, hoping for a rebound that didn't come. The losses reached about £827 million - roughly $1.4 billion, more than the bank's capital. Barings was declared insolvent on 26 February 1995, and ING bought it for £1.

3. GameStop - January 2021

GameStop, a struggling video-game retailer, was one of the most shorted stocks in America - hedge funds had bet heavily on its fall, with short interest reported above 100% of the shares available to trade. Small investors, many organising on online forums, bought the shares and bought call options in huge numbers.

As the price rose, short sellers had to buy shares to cut their losses (a short squeeze). Many analysts argue that call buying added fuel: option dealers who sold those calls hedge by buying shares too - a "gamma squeeze", the gamma from lesson 7 in action. How big that effect was is still debated - a later SEC staff report played it down. The stock hit $483 intraday on 28 January 2021; the same day several brokers restricted buying, and within days the price fell about 80%.

4. India: nine in ten F&O traders lost money

India has the busiest equity options market in the world, and its regulator, SEBI, studied what actually happened to individual traders:

SEBI's September 2024 study found about 93% of over one crore individual traders lost money across FY2022-24, with total losses of about ₹1.8 lakh crore. Its July 2025 follow-up found more than 91% lost money in FY2025 alone, and net losses rose to about ₹1.06 lakh crore, up from about ₹75,000 crore the year before. India has since tightened its rules: from November 2024, index contracts must be worth ₹15-20 lakh (up from roughly ₹5-10 lakh), and each exchange may offer weekly expiries on only one benchmark index - both aimed at cooling small-ticket speculation.