What the law says
Options are securities, regulated by the SEC, and federal law deals with the gambling question head on. Since 1982 it has said that no state law against wagering or “bucket shops” can invalidate an option. That’s a deliberate choice. Options let farmers, companies and fund managers protect themselves against price swings, which is a job a casino bet doesn’t do.
The UK draws the same line, with one exception. In 2019 the FCA permanently banned binary options for ordinary investors. These were all-or-nothing bets on whether a price would rise or fall, and the FCA itself called them “gambling products dressed up as financial instruments”.
How it works in practice
The gambling comparison gets harder to dismiss once you look at how many people use options. Buying a cheap option that’s far from the current price, and expires soon, is a small bet with a high chance of losing it all and a small chance of a big payout, which is how a lottery ticket works. Same-day options, known as 0DTE, now make up more than half of all S&P 500 options volume, and Cboe estimates that individual traders account for around half of that.
The US doesn’t publish how many retail options traders lose money, but India’s regulator does, and it found that between 88% and 93% of individual traders in equity futures and options lost money in the years it studied. A US study found that retail options traders lost about $2.1 billion between late 2019 and mid-2021, before counting trading costs. The apps don’t help either. Massachusetts fined Robinhood $7.5 million in 2024 over features such as confetti and digital scratch tickets that regulators said made trading feel like a game.
What it means for you
Options aren’t gambling when you use them the way they were designed, to protect a share you own or to earn income on it. Buying short-dated options to chase a quick win is much closer to a bet, with worse odds than most people realise. If that’s what you’re doing, use money you can afford to lose and keep track of whether you’re actually ahead.
Questions people also ask
Can you lose more than you invest with options?
If you buy options, the most you can lose is the premium you paid. If you sell certain options, such as uncovered calls, your losses can be unlimited.
What percentage of options traders lose money?
No US regulator publishes this. India's securities regulator does, and it found that between 88% and 93% of individual traders in equity futures and options lost money in the years it studied.
What are 0DTE options?
Options that expire on the same day they're traded. They now make up more than half of S&P 500 options volume, and the exchange that lists them estimates that individual traders account for around half of that.
Why does my broker need to approve me for options?
US rules require brokers to check your experience and finances, and give you a risk disclosure document, before you can trade options.
Sources
- 15 U.S.C. 78bb(a)(3), state gambling laws can't invalidate options
- SEC Investor Bulletin, An Introduction to Options
- FINRA, Zeroing In on 0DTE options
- FCA confirms permanent ban on the sale of binary options to retail consumers (2019)
- SEBI study on individual traders in equity futures and options (via Business Standard)
- Bryzgalova, Pavlova and Sikorskaya (2023), Retail Trading in Options and the Rise of the Big Three Wholesalers, Journal of Finance
- Cboe, SPX 0DTE options jump to 61% share on retail resurgence (2025)
- Boston Globe, Robinhood agrees to pay $7.5 million to settle Massachusetts complaints (2024)