Nithin Kamath, CEO and co-founder of Zerodha, has raised fresh concerns about the future of weekly options contracts in India. In a post on X (formerly Twitter), Nithin Kamath admitted he was “as clueless as everybody else” about where regulations are heading but added that he “would not be surprised if they were banned completely.”
Kamath’s comments come amid speculation that market watchdog Sebi is considering ending weekly expiries. Following the latest Sebi board meeting, chairman Tuhin Kanta Pandey said that everyone should wait for the consultation paper, terming it a complex issue which requires a lot of study.
The move has also sparked debate within the trading community, given how critical weekly options have become to market volumes in recent years.
What are weekly option expiries?
Weekly option expiries, introduced by stock exchanges to give traders more frequent opportunities to hedge or speculate, have grown immensely popular over the past few years. Unlike monthly contracts, which expire once a month, weekly options settle every Thursday. This frequent expiry structure attracts day traders and short-term participants, often leading to sharp bursts of activity.
For brokers, these products have been a significant driver of trading volumes and therefore revenues. However, regulators have repeatedly expressed concerns that retail investors may be taking on excessive risk through such frequent high-leverage bets.
Kamath flags regulatory risk as brokers’ biggest challenge
Kamath highlighted that regulatory risk remains the single biggest threat for brokerage firms. Since most brokers in India, including Zerodha, earn the bulk of their revenues from traders and very little from long-term investors, changes in derivative rules can have an outsized impact on their business models.
“We earn nothing from investors, either as brokerage or commissions from selling mutual funds. The more I think about it, we are just biding time before we will be forced to make a change,” he noted.
Sharing market data, Kamath pointed out that option trading volumes have already declined nearly 40 per cent after the number of weekly expiries was halved from four to two. He warned that if the remaining two weekly expiries were also removed, market activity could fall back to 2019 levels.
While he personally believes that a middle ground involving “weekly expiries with a product suitability framework” would be a reasonable solution, Kamath acknowledged that regulators may prefer a complete removal.
He added perspective for those comparing India to the US, noting that despite India being the largest market by number of derivative contracts, the actual leverage is far lower—US margin debt is around $1 trillion compared to India’s $10 billion.
Kamath’s remarks underline the growing divide between market participants and regulators. Weekly options have democratized access to derivatives trading, making it easier for retail investors to participate, but they have also raised alarms about risky behaviour, speculation, and potential losses among small traders.
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