Zerodha's Nithin Kamath Thinks Weekly Expiry For Options Was A Bad Idea — Profit Exclusive

There have been a lot of moves that the markets regulator has made in order to control the volume of Futures and Options trading. The impact of these regulations and changes has been evident in the current trade volumes as well. The change in the landscape is clear to players in the industry like Zerodha's Nithin Kamath.

"I feel that weekly options was a really bad idea. This started around 2019-2020, when weekly options was given approval. And this approval itself is a bad idea," Kamath, the co-founder of Zerodha, said.

Trading volumes have dipped 30%, while contract size has increased, according to Kamath. People who trade futures will move to trade options. And the people who short-options will buy options. The biggest problem in the market is buying options because the odds of a trader surviving is low, he said.

The flip side of the regulation is that it is moving people who trade futures to trade short options to buying options, Kamath said.

The hike in Securities Transaction Tax was supposed to regulate option volumes. It hurt futures volumes more, he said.

"It's bad for the industry but good for the investor. The weekly expiry is absolutely the worst. The exchanges are competing and it was bound to happen that they would push it to the brink of failure," he said.

The business tycoon is also not afraid to admit that he blew his account a few times in his early days. Kamath was never out of place in the markets, thanks to his marwadi friends who got him started at about 18 years old.

"In a sense, the entire business was started with Rs 5 to 10 lakh. It was not really meant to be this. When I go back and look at the business plan, the best case was one lakh customers at most. We never thought we could go any further," he recalled.

The ride was bumpy for the trail-blazer, as his broking job continued to concern his extended family for years, Kamath said.

"I got asked to go get a real job till 2012-13. For more than 10 years, people always asked for a real job. I come from a family where if you don't do engineering from an A-Grade college, people look down upon you. I was the first business man in the extended family," he said.

Kamath notes that post-Covid turn-out has been an outlier. The pace of growth businesses have seen post-Covid is not very sustainable. Last year was probably the peak of the broking industry, he said.

Looking back, Kamath also highlighted how the amount that investors trust them with has evolved.

"The first three years, people would be scared to put Rs 50,000 with us. Today we have customers who put Rs 500 crore with us. Our philosophy is customer first. Other platform nudge users to trade, while we don't have that," he said.