Zerodha CEO Nithin Kamath has recently addressed concerns about potential over-leverage in India's options market, particularly in comparison to the United States. He argues that such comparisons are "flawed" and that the Indian market is, in fact, far less leveraged than its US counterpart.

Kamath points out that India's financial markets are still 15-20 years behind the US in terms of maturity, yet they operate with significantly lower leverage. He highlights the disparity in margin funding, noting that the US margin funding market recently crossed $1 trillion, while India's remains under $10 billion, just 1% of the US figure. Furthermore, while US stock markets see around $1 trillion worth of short positions, India's stock lending and borrowing activity is "practically insignificant".

Kamath also addressed the growing options trading volumes in India, stating that concerns about India being "overleveraged" are misplaced. He clarifies that focusing solely on the number of contracts traded, without considering the premiums or actual value involved, leads to inaccurate conclusions. He stated that despite all the discussions about the Indian derivative turnover, India is barely 25% of US premiums. While India accounts for nearly 10 times more options contracts than the US, the premium turnover is only a fourth of that in the US.

His core advice to investors is to only trade what they understand, invest what they can afford to lose, learn instruments thoroughly before trading, use risk caps and stop-losses, avoid over-leverage, diversify beyond F&O, and avoid emotional trading cycles like revenge trades and FOMO.

It is important to define "Options market". Options trading involves contracts that give the buyer the right, but not the obligation, to buy or sell an underlying asset at a specified price on or before a specific date. Options can be riskier than traditional stock trading, but with proper education and risk management, they can be a valuable addition to an investment strategy.

India's retail options trading activity has plunged to a three-year low after the nation’s market regulator imposed strict measures. The rise and risk of F&O trading is that India's F&O market has grown at a breathtaking pace. Active retail traders rose from 5.1 million in FY22 to 9.6 million in FY24. Monthly derivatives turnover on the NSE surged 30x between 2020 and 2024, making India the largest options market globally by volume. Easy access via trading apps, zero brokerage models, social media hype ("finfluencers"), and a post-pandemic bull market are some of the reasons for this.

Kamath has consistently voiced caution, warning against overtrading and emotional decisions, coining "percentage blindness," and opposing extending F&O hours.