We had a discussion in the All Star Options chatroom yesterday about differences of opinion that got my mind spinning in a very positive way.
Sometimes, we traders might get a little offended when we've done the work to come up with a trade idea and share it with others -- then someone else offers a hot take on why the originator of the idea might be wrong. For some of us, we get momentarily annoyed, then we forget it and move on. For others, the "new information" causes us to abandon our trade thesis all together, sending us back to the drawing board in a state of frustration.
In the worst case, the originator of the idea gets offended, defensive, and perhaps even verbally abusive. And then both sides engage that way and nothing good comes from it.
I'd argue my best response is to meet the counter-intelligence as an opportunity to dig deeper to see if perhaps I missed something? If I find that I have, great! I'm better for it. If not, then I'll just end up feeling better about my opinion.
But the real meta thought here is this: WE WANT PEOPLE TO DISAGREE WITH OUR IDEAS.
Disagreement is the very basis of our profit opportunity!
If every trader and investor under the sun agreed that XYZ will be trading higher imminently, then we'd all already be positioned for such eventuality and there would be nobody left to buy which is the only thing that sends prices higher.
We need traders/investors with different ideas, different time frames, and different opinions to provide liquidity by taking the other side of our trades.
We need them to get short when we're buying so that they'll be forced to cover later, at higher prices.
We need them to ignore the idea as frivolous, only to awaken to the idea later and chase into the trade -- perhaps buying it from us as we are now harvesting our profits.
We need them to get loud and obnoxious about why we're wrong so that their sentiment will infect other market participants, duping them into becoming our counterparty liquidity partners for our best trades.
Difference of opinion is what makes a market. Without it, there would be no profit opportunities. Everything would be perfectly priced with no alpha whatsoever to extract.
So the next time somebody gives you pushback on an idea you've worked hard on -- welcome it! Their disagreement is a shining example of why your idea has potential!
Trust your process, trust your gut, and accept this gift.
Of course, whether in my chatroom, on social media, or over drinks at a bar, if you have an opinion that is different than someone else's, don't be a d*ck about it. Just state your case and swim in the delightful current that results from thoughtful and respectful conversation that makes everyone involved better for it.
If there's ever a time to be scared of a trade you're in, it's when everyone you encounter agrees with you! That's where the real trouble starts.
Sean McLaughlin | Chief Options Strategist, All Star Charts
