Derivative trading has been under market regulator Sebi's radar for a long time now as these futures and options contracts come with substantial risk and often end up erasing a significant portion of investors' wealth. In this context, we remember why legendary investor Warren Buffett once called derivatives "financial weapons of mass destruction" and then bet $40 billion on them a few years later.
In his 2002 letter to Berkshire Hathaway shareholders, Buffett called derivatives "time bombs, both for the parties that deal in them and the economic system." "In our view, however, derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal," he wrote.
