How options trading became India's new smoking habit in derivatives boom

As smoking lost its cinematic allure, options trading too must be deglamourised through taxation, regulation and cultural signalling to curb risky "get rich quick" behaviour

One of my enduring memories from Hindi cinema is Dev Anand, the epitome of the romantic hero, playing a carefree army officer and lip-syncing to Mohammed Rafi’s “Har fikr ko dhuen mein udaata chala gaya”. What lingers is not just his charisma, Rafi’s silken voice, or Sahir’s words, but the cigarette dangling from his fingers, smoke curling lazily into the air. The masculinity and romance of that moment were inseparable from smoking. This was the 1960s, long before “Smoking Kills” warnings made their way into cinema. 

Six decades later, the imagery around smoking could not be more different. The romance has been stripped away, replaced by Akshay Kumar reminding audiences that “Herogiri phoo phoo karne mein nahi hoti”, and disturbing visuals of a middle-aged woman with half her jaw removed due to oral cancer, shown in mandatory theatre documentaries. The transformation has been deliberate and uncomfortable. 

The deglamourisation of smoking has succeeded to a meaningful extent. Among GenZ, it is no longer seen as sophisticated or adult, but as dirty, unhealthy, and self-destructive — pushed firmly out of the aspirational mainstream. 

It is hard not to see a parallel with India’s derivatives markets, particularly options trading, which has acquired a powerful allure among post-Covid GenZ investors. It is widely perceived as a smart and sophisticated way to make quick money — an impression reinforced by Securities and Exchange Board of India (Sebi) regulation and a dense vocabulary of technical jargon such as Greeks, volatility smiles, spreads, and straddles. Much as on-screen smoking by matinee idols inadvertently made cigarettes aspirational, options trading has benefited from being the only widely accessible “get rich quick” activity operating within a formal regulatory framework. The assurance of exchange-backed settlement if trades move favourably adds an institutional stamp of legitimacy, lending an aspirational veneer to an already glamourised activity. 

The detailed Sebi orders in the Jane Street (JS) and Avadhut Sathe (AS) cases strip away the illusion surrounding retail options trading. The JS order shows how a well-capitalised global player manipulated cash, futures, and options — even in highly liquid stocks and indices — using multiple entities, reverse trades, and carefully sequenced intraday phases. 

The AS order is equally instructive, documenting — through screenshots and transaction evidence — how ₹601 crore was collected from over 300,000 participants by peddling trading calls under the guise of education. Together, the orders reveal two sides of the same ecosystem: Extraction by sophisticated players and supply by unregistered trading-call providers masquerading as educators. Read alongside Sebi’s research showing that over 93 per cent of retail options traders incur losses, it becomes clear where the odds lie. 

If options trading is to be deglamourised, the response must be multi-dimensional. The objective should be deterrence, not prohibition, without impairing legitimate market functions such as price discovery and hedging. As with smoking, fiscal tools matter. Tobacco is not banned, but heavily taxed. 

In the same spirit, so-called “educators” teaching options trading should face sin taxation through higher goods and services tax (GST) on courses and advertising revenues. 

Further, as with crypto assets, profits from options trading should be subject to a flat tax, with losses barred from being set off against other income. Experience with smoking shows that even overwhelming scientific evidence linking it to cancer had a limited impact until the behaviour itself was made socially unattractive. 

Likewise, Sebi’s repeated reports on retail losses are unlikely to curb enthusiasm for “getting rich quick” through trading. Cultural signalling, therefore, becomes critical. Influencers and public figures whom GenZ respects must be persuaded to highlight — forcefully and unambiguously — the damage caused by options trading. 

Truth be told, this is a long and difficult battle that must be fought on multiple fronts, and Sebi cannot be expected to fight it alone. Deglamourising options trading will require sin taxation, punitive treatment of speculative gains, and sustained cultural signalling. Perhaps decades from now, today’s slick trading-app screenshots will evoke the same uneasy discomfort as a screen hero’s cigarette — a reminder of how derivatives, when misused, become the financial weapons of mass destruction Warren Buffett warned about.

 

The writer heads Fee-Only Investment Advisors LLP, a Sebi-registered investment advisor; X: @harshroongta