STT Hike Backfire? Nithin Kamath Says Traders Are Moving to Riskier Trades: What the STT Hike Changed for F&O
- October 29, 2026
- Posted by: Chaitanya Auti
- Category: News
Nithin Kamath wrote on 28 Oct 2026 that the STT hike and other F&O curbs may have pushed traders toward riskier behaviour: options are about 90% of F&O activity, and at Zerodha only about 10% of option buyers are profitable, against about 40% of option sellers and about 50% of futures traders; STT on futures rose from 0.02% to 0.05% from 1 April 2026.
Quick Answer
The STT hike raised securities transaction tax on futures from 0.02% to 0.05% and on options premium from 0.10% to 0.15% from 1 April 2026. Nithin Kamath argues that this and other F&O curbs may have pushed F&O traders toward options buying, weekly expiries and unregulated crypto contracts, which carry more risk. His numbers are internal observations from Zerodha: roughly 50% of futures traders, 40% of option sellers and 10% of option buyers are profitable. This is his opinion and not independent proof, and this article is educational and not a recommendation.
A tax meant to slow speculation can change what traders do instead of how much they trade. This article explains what the STT hike changed in rupees, what Nithin Kamath says traders did in response, which of his numbers are data and which are opinion, why options buying can look attractive after a cost increase, and what F&O traders should watch.
Two flags. The shift toward riskier trades is a claim from one broker’s founder, and his post gives no independent data for it. One of the articles I read on the rate change was dated before the April effective date, so I used a second source to confirm the rates. It is educational and not advice.
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The STT Hike in Numbers: What Changed from 1 April 2026
| Segment | Old STT rate | New STT rate |
|---|---|---|
| Equity futures | 0.02% | 0.05% |
| Options premium | 0.10% | 0.15% |
| Options exercise | 0.125% | 0.15% |
| Delivery and other segments | Unchanged | Unchanged |
The STT hike was announced in the Union Budget on 1 February 2026 and took effect for transactions on or after 1 April 2026. In percentage terms the increase on futures is 2.5 times the old rate, and on options premium it is 50% higher. Securities transaction tax is a cost on every qualifying trade whether the trader makes a profit or not, which is why a change in it shifts behaviour at the margin.
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What the STT Hike Costs in Rupees: A Simple Illustration
| Illustration (my calculation, sell side) | Old STT | New STT |
|---|---|---|
| Futures sold worth Rs 10 lakh | Rs 200 | Rs 500 |
| Options premium of Rs 1 lakh sold | Rs 100 | Rs 150 |
| Options exercised with Rs 1 lakh settlement value | Rs 125 | Rs 150 |
These figures use the standard structure in which STT on futures and on option premium falls on the sell side, and the exercise rate applies on settlement. Check your contract note for the exact charge, because brokers show STT as a separate line. The extra cost per trade looks small, but for a trader who trades often, the extra Rs 300 on every Rs 10 lakh of futures sold adds up quickly.
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What Nithin Kamath Says About the STT Hike and Risky Trades
In a post titled Unintended consequences of higher STT and F&O curbs, dated 28 Oct 2026, Nithin Kamath argues that the STT hike and other changes may have pushed traders toward even riskier behaviour. He lists several shifts: more options buying, more trading in very short horizons, more MTF use and more crypto F&O activity.
| Shift Nithin Kamath describes | Why it can raise risk |
|---|---|
| More options buying | It needs only the premium, while futures and option selling need larger margin as contract sizes have grown |
| Weekly expiries and 0-day options | Trading horizons shrink to a single day |
| More MTF use | It is long-only, so it works only when prices rise |
| More crypto F&O | Contracts with 100x to 300x gearing on unregulated platforms |
He adds that regulatory and tax changes have second and third order effects, and that the risks are likely to show up most when markets fall or move sideways. His closing line is that the risks always show up in the most unexpected places.
Zerodha Profitability Data Behind the STT Hike Debate
| STT hike debate: trader group at Zerodha | Approximate share who are profitable |
|---|---|
| Futures traders | About 50% |
| Option sellers | About 40% |
| Option buyers | About 10% |
| MTF users | Too early to tell |
These figures come from Zerodha’s own client data as described by its founder, and they are approximate. He also says options make up about 90% of all F&O trading activity, so the group with the lowest profitable share is also the biggest. He stresses that the comparison is relative and does not mean futures or option selling is low risk.
The numbers support one narrow point: among Zerodha traders, option buyers do worse than the other groups. They do not show that the STT hike caused more people to become option buyers, because the post does not compare the share of option buyers before and after April 2026.
Why an STT Hike Can Push F&O Traders Toward Options Buying
Three mechanisms make the claim plausible. First, a higher STT on futures and on sold options raises the cost for sellers, while a buyer of an option pays STT only when selling or exercising. Second, buying an option needs only the premium, so a trader with a small account can take a position without posting large margin. Third, weekly expiries give such buyers a low-cost-looking, short-dated bet that resolves within days.
Each of these is a reason a trader might move, but none proves that traders moved because of the STT hike. Contract sizes, expiry rules, margin norms and market conditions changed too, and Nithin Kamath himself calls the changes a package of curbs and not only a tax. Separating the effect of the STT hike from the other changes needs exchange data on the mix of buyers and sellers over time.
Crypto F&O and MTF: Where Else Activity May Move After the STT Hike
The post notes that crypto F&O volumes have surged, with many contracts offering 100x to 300x gearing on platforms that are unregulated in India. A small price move can wipe out the margin on such a contract. MTF, the margin trading facility, has also grown, but it is long-only, so it benefits traders only in rising markets and carries interest cost.
For F&O traders, the practical lesson is about what a cost increase does to choices, not only to costs. If the lower-cost-looking alternative has a worse risk profile, a higher STT hike effect on cost can be outweighed by a worse effect on outcomes.
What the Data on the STT Hike Cannot Prove
| Question | What is known | What is missing |
|---|---|---|
| Did options buying rise? | Options are about 90% of F&O activity | A before and after comparison |
| Did traders become riskier? | Option buyers are the least profitable group | Independent data across brokers |
| Did the STT hike cause it? | Costs rose from 1 April 2026 | A way to separate the other curbs |
| Did revenue or volumes fall? | Not covered in the post | Exchange turnover data |
A fair reading is that the STT hike backfire claim is a hypothesis from an experienced broker, supported by internal data on profitability but not tested against independent data. Supporters of the tax would argue that raising the cost of speculation is its purpose, and that a drop in some kinds of trading is the intended effect. Both views are reasonable.
What F&O Traders Can Track After the STT Hike
- Your own cost line. Add up STT, brokerage, exchange charges and taxes on your contract notes for a month and compare them with your gross profit and loss.
- Your own result by product. Compare futures, option selling and option buying outcomes separately, as the Zerodha figures do.
- Holding period. Notice how much of your trading happens on expiry day, since that is where Nithin Kamath sees risk concentrating.
- Margin and gearing. Know how much you can lose on a position before you enter it, especially on any unregulated product.
These are habits for understanding results, not instructions to trade or not to trade. Nobody can say from this data which product suits you, and past profitability of a group does not predict an individual’s outcome.
Risks Behind the STT Hike Debate
- Single source. The backfire claim rests on one broker’s observations, so treat it as a hypothesis.
- Approximate figures. The 50%, 40% and 10% profitability shares are rounded and describe Zerodha clients, not all traders.
- Options buying losses. Even if an STT hike does not cause it, the group with a 10% profitable share carries the highest loss risk.
- Unregulated products. Crypto F&O with 100x to 300x gearing sits outside SEBI protection, and losses can be total.
- Rule changes. Taxes, lot sizes and expiry rules can change again, which changes the cost picture.
Conclusion: Judge the STT Hike by Behaviour and Outcomes, Not Only by Cost
The STT hike raised costs on futures and options from 1 April 2026, and Nithin Kamath says traders may have moved toward riskier options buying and short-dated trades. His data shows option buyers are the least profitable group, but it does not yet prove the STT hike caused the shift. F&O traders are best served by tracking their own costs and results.
Disclaimer: Data and figures in this article are sourced from publicly available information. These may or may not be accurate. Please verify all data with the official NSE (nseindia.com) and BSE (bseindia.com) websites before making any investment decision. Investments in securities are subject to market risk. This content is for educational purposes only and is not investment advice by Univest (SEBI RA INH000013776).
Frequently Asked Questions
What are the new STT rates after the STT hike?
Ans. From 1 April 2026, STT on equity futures is 0.05% (from 0.02%), on options premium 0.15% (from 0.10%) and on options exercise 0.15% (from 0.125%). Delivery and other segments were unchanged.
What does Nithin Kamath say about the STT hike?
Ans. In a post dated 28 Oct 2026, he says the STT hike and other F&O curbs may have pushed traders toward even riskier behaviour, including more options buying, very short-dated trades, MTF and unregulated crypto F&O. He calls these changes risky for market structure.
How many F&O traders are profitable according to the Zerodha data?
Ans. He gives approximate shares for Zerodha traders: about 50% of futures traders, about 40% of option sellers and about 10% of option buyers. For MTF he says it is too early to tell.
Did the STT hike cause more options buying?
Ans. The data does not show that. Options are about 90% of F&O activity, but the post gives no before and after comparison. Lot sizes, margin norms and weekly expiries also changed, so the effect of the STT hike alone cannot be isolated.
Why is options buying seen as risky after the STT hike?
Ans. Option buyers need only the premium, which makes positions affordable, but their profitable share is only about 10% in the Zerodha figures. Short-dated and zero-day options can expire worthless quickly.
What does a higher STT hike mean for the cost of a trade?
Ans. On a futures sale worth Rs 10 lakh, STT rises from Rs 200 to Rs 500 in my illustration. On Rs 1 lakh of options premium sold, it rises from Rs 100 to Rs 150. Your contract note shows the exact amount.
Is this article advice on F&O trading after the STT hike?
Ans. No. It explains a rate change and one broker’s view of its effects. F&O products carry a high risk of loss, and you should consult a SEBI-registered adviser before trading.
Is this article investment advice?
Ans. No. It is educational and not a recommendation to buy or sell. Please check the figures against company filings and your own risk profile before you act on anything you read here.