The Faster Markets Get, The Better It Is To Be An Options Trader

Hello Spirit Animals,

Ben Carlson over at A Wealth of Common Sense had an excellent post up last week called Markets Are Now a Beauty Contest on Steroids. If you haven't read it yet, I highly recommend it.

The premise is simple and powerful: Keynes compared the stock market to a beauty contest back in 1936 — where the game isn't about picking what you think is prettiest, but what you think everyone else thinks is prettiest. That dynamic hasn't changed. What has changed is the speed at which the contest plays out.

Ben uses the recent silver mania as his case study, and it's a good one. A 55% run-up in weeks, followed by a crash that wiped out a third of its value. The two biggest single-day drops in silver's history — bigger than anything during the Hunt brothers' attempted corner in 1980 — happened in the span of a couple weeks. A 2x leveraged silver ETF ballooned from $1 billion in assets to nearly $6 billion at the peak. Social media swarmed. Reddit piled in. Hedge funds followed. And then it all unwound. Fast.

And Ben isn't alone in this observation. In the age of social media, AI, algorithmic trading, and an ever-expanding menu of leveraged vehicles designed to capture fast moves — markets are moving faster. In both directions.

I used to have a belief about this. I used to think: the faster markets get, the slower I want to operate. That's my edge.

It felt right for a long time. And I still value patience and discipline. But the belief itself has evolved.

Today, it's been replaced by something I think is more useful:

The faster markets get, the more important defined risk strategies and position sizing become.

And the best product I know for delivering defined risk outcomes is options.

Think about what defined risk actually means. It means you walk into a trade knowing the absolute worst-case scenario before you place it. You can't lose more than you invested. That's it. The floor is set. There are no margin calls in the middle of the night. No gap down that wipes out your account because you were short something that went parabolic. No stop-loss that gets blown through in a fast market, filling you 10% below where you thought you'd be taken out.

When you buy an option — or structure a spread with defined risk — you've already accepted the maximum loss before the trade begins. And if you've sized that position in a way where absorbing a 100% loss on the trade doesn't materially damage your account or your psychology? Then the speed of markets becomes a lot less scary. It just becomes something to observe. Information. Data. Not a threat.

This is a massive psychological edge that I don't think enough people appreciate.

Because here's the thing about speed — it's wonderful when you're on the right side of the trade. Those momentum moves, those breakouts that just keep going, those gap-ups where you wake up and your position is already deep in the money. Beautiful. Speed is your friend in those moments.

But speed is catastrophic when you're on the wrong side with no stop on your risk. And stops themselves are becoming less reliable in fast-moving markets. Slippage is real. Gaps are real. The kind of overnight moves we're seeing with increasing frequency can turn a "manageable" loss into an account-altering event if you're trading without a defined risk structure.

Options solve this problem. Elegantly.

And here's what makes right now such a special time to be an options trader: the infrastructure has never been better. Options volume is exploding across all markets. Liquidity has never been deeper. Bid-ask spreads have never been tighter. Fair executions are more accessible than ever before. Products that didn't exist five years ago are now available and liquid. Weekly expirations, 0DTE options, options on ETFs that cover every corner of the market — the toolkit is enormous.

The popularity of options trading is rising for good reason. More participants means better markets for all of us.

So let me connect these dots:

Markets are speeding up. That's not going to change. The information age, social media, AI-driven trading, leveraged products — all of these forces are amplifying the beauty contest that Keynes described 90 years ago. Moves that used to take months now happen in weeks. Moves that took weeks now happen in days.

You can fight that reality. Or you can equip yourself with the right tools to thrive within it.

Defined risk options strategies, paired with disciplined position sizing, are — in my view — the single best way to participate in fast markets without being destroyed by them. You get to play the game. You get to express your views. You get to capture the upside when speed works in your favor. And when it doesn't? You already know the worst that can happen. You already said yes to it before you placed the trade.

The markets won't be slowing down. But you don't need them to.

You just need to know what you're risking before you risk it.

See you in the markets.

Sean McLaughlin | Chief Options Strategist, All Star Charts

--> If you'd like to receive these notes in your email, sign up here.