Zerodha Co-Founder Warns New Taxes and Rules May Push Traders Toward Riskier Bets

Higher securities transaction taxes and new rules meant to cool down futures and options speculation might actually be pushing traders toward riskier behavior. Zerodha co-founder Nithin Kamath shared this warning in a recent post on social media.

Profitability Breakdown

Kamath pointed out that roughly fifty percent of individual futures traders and forty percent of option sellers on his platform were profitable. In comparison, only ten percent of option buyers made money. He noted that while losses from buying options are limited to the initial price paid, buying them repeatedly often leads to higher total losses over time than trading futures or selling options. Kamath also stated that it was still too early to judge the profitability of the margin trading facility because it is a new product.

Regulatory Impact

According to Kamath, steady increases in the securities transaction tax on futures have pushed trading activity away from futures and toward options, which now make up about ninety percent of all futures and options volume. Larger contract sizes have also raised margin requirements for futures and option sellers, while buying options requires less money upfront. At the same time, the shift toward weekly expiries has turned trading into very short-term bets. Kamath also warned that these rules might be driving traders toward unregulated crypto platforms offering extreme leverage.

Context

Futures and options are complex financial contracts whose trading volumes have grown rapidly among retail investors in India in recent years. Regulators often use taxes and contract rules to curb excessive speculation and protect retail traders from heavy losses.