- Only 10% of option buyers on Zerodha make money, says CEO Nithin Kamath
- Higher STT and curbs pushed retail traders into riskier option buying trades
- STT hikes raised futures costs, shifting 90% of F&O activity to options
Only about one in 10 option buyers on Zerodha makes money, according to founder and CEO Nithin Kamath. He blames higher securities transaction tax (STT) and tighter curbs on derivatives trading for pushing retail traders into those very trades.
In a LinkedIn post on Wednesday, Kamath said about half of futures traders on Zerodha are in profit, compared with around 40% of option sellers.
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The curbs were meant to discourage speculation, he said, but may have steered traders towards even riskier behaviour. "The unintended consequence has been traders moving to riskier options trades," Kamath wrote.
Why Traders Moved To Option Buying
As STT on futures rose over the years, Kamath said, trading shifted to options, which now make up about 90% of F&O activity.
"One of the unintended consequences of increasing STT and all the other measures to curb F&O speculation is that they may have pushed traders toward even riskier trading behaviour," he said.
The Budget for 2026-27 raised STT on futures to 0.05% from 0.02%, and on option premiums to 0.15% from 0.1%, effective April 1. That followed a hike in the July 2024 Budget.
Larger contract sizes have also raised the margin needed for futures and option selling, Kamath said. "Larger contract sizes have made trading futures and selling options more expensive in terms of the margin required. Buying options, on the other hand, is cheaper because it only requires the premium. Hence, more retail traders are buying options."
Weekly expiries, he added, have shortened traders' horizons from weeks to days.
"Earlier, traders mostly traded monthly expiries. As more contracts started expiring every week, trading effectively became 0-day options. Traders began thinking in days rather than weeks and betting on price moves over increasingly short horizons," he wrote.
Kamath acknowledged that an option buyer's loss on a single trade is capped at the premium, but said the risk adds up over repeated trades. "In theory, losses from buying options are limited to the premium paid. But buying options repeatedly, more often than not, ends with traders losing more money over time than trading futures or selling options. This is not to say that trading futures or selling options is low-risk. It's a relative comparison."
ALSO READ: Tax Income, Not Transactions: Nikhil Kamath's Fix For F&O Traders
Curbs Pushing Traders Towards Crypto
SEBI's latest study found that 78.6 lakh individuals traded equity derivatives in FY26, about 20% fewer than a year earlier. They lost a combined Rs 91,685 crore, and roughly nine in 10 ended the year in the red.
Kamath linked the curbs to a jump in crypto F&O, where many contracts offer 100 to 300 times leverage. He said he had seen several new unregulated platforms advertising them in recent weeks.
"This isn't just about F&O, by the way. These measures also explain the spectacular increase in crypto F&O volumes. Crypto F&O exists in a grey zone where it's neither legal nor illegal, and traders can get as much as 100x to 300x leverage on many of these contracts. In the last couple of weeks alone, I've come across multiple new platforms advertising crypto F&O contracts, including perpetual futures, none of which are regulated. That's another unintended consequence of these regulatory measures," he said.
Last month, the Financial Intelligence Unit issued notices to 15 offshore crypto platforms and sought to have their apps and websites blocked in India.
Kamath said tax and regulatory changes reshape market structure, and the costs show up as wider spreads, higher impact costs and thinner volumes when markets fall or move sideways.
"The larger point I'm making is that any regulatory or taxation change has second- and third-order effects. These changes fundamentally alter market structure, and not always for the better, as the recent measures show. The risks always show up in the most unexpected places. And they show up especially in market phases like this one, when markets fall or trade sideways, and liquidity starts to evaporate. That shows up as wider spreads, higher impact costs, and a further drop in trading volumes," he noted.
ALSO READ: 'Fix Inequality, Before...', Nikhil Kamath's Warns India's Wealthy
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