Motley Fool Options Review
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Motley Fool Options is an options alerts service run by one of the most renowned stock picking teams in the business. The service has an 85% profitability rate and a 10+ year track record. Read our review to determine whether or not this service is right for you.
About The Motley Fool
The Motley Fool is one of the most trusted names in the world of financial media. The company started out in 1993 when Tom and David Gardner started sharing their investment advice online. This was back in the AOL days before websites like MarketWatch and Yahoo Finance even existed.
The Gardner brothers quickly grew and online following due to their unique approach to investing. While publications like The Wall Street Journal and Investors Business Daily catered to experienced investors and Wall Street hotshots, The Motley Fool spoke directly to casual retail investors. Simply put, The Motley Fool spoke the language of the people. The Gardner brothers featured lighthearted investing lessons that were easy for anyone to follow.
Over the years, The Motley Fool’s audience continued to grow rapidly, and the investment advice was so popular that people were willing to pay for it. In the early 2000’s the company launched its first subscription service called Stock Advisor and continued to launch new services since.
We wrote a review of Motley Fool Stock Advisor a couple of years ago and a Motley Fool Rule Breakers review this year. Both of these programs are time-tested stock picking services that offer members fresh stock picks every month. Both programs have successfully beaten the market for over 15 years.
In this review, we are going to take a look at Motley Fool Options, an options picking service. Keep reading our Motley Fool Options review to see if the Motley Fool team can make options picks as well as they can make stock picks.
About the Motley Fool Options Service
Motley Fool Options is an options alerts service that was launched in 2009, roughly seven years after the launch of Stock Advisor (the stock-picking service). Motley Fool Stock Advisor was wildly popular and the team at Motley Fool wanted to provide a similar offering for options traders.
There are two key components of the Motley Fool Options service, both of which we will analyze in-depth.
First, there is the OptionsU education program. The program provides a comprehensive options education program for new options investors. The program features a comprehensive curriculum that covers everything from beginner level topics to advanced options trading strategies.
Second (and most importantly), there are options alerts. If you are going to pay the subscription fee, you are likely paying for the alerts, as this is where you should be able to recoup your costs.
We are going to take a closer look at both of these components in our Motley Fool Options review, but first, let’s discuss who the service is best for.
Is Motley Fool Options Right For You?
Before we dive too deep into our review, we wanted to discuss who this service is best suited for. Due to the nature of options, an options alerts service is a lot different than a stock picking service. We can confidently recommend Stock Advisor or Rule Breakers to just about any stock market investor. Motley Fool Options is designed for a few specific types of investors.
Let’s start with the obvious. If you already trade options, this service could be a good fit. Keep reading the review to learn more of the details.
If you are completely new to options trading, you should be fully committed to learning. Motley Fool Options gives you access to a comprehensive options education that you will get a lot of value out of. That said, you may want to do some of your own preliminary research to make sure options trading is a good fit for you. Options are more complex and more volatile than stocks, meaning they are not a great fit for every investor. Options traders love the volatility, however, some investors prefer stability. If you are committed to learning how to trade options like a pro, this service could be a good fit.
If you know nothing about options and you aren’t sure whether or not you will actually trade them, Motley Fool Options probably won’t be a good fit for you. The subscription is pricey so you should be fully committed when you purchase. If options are just another shiny object for you, you may want to start with some free education on YouTube and blog sites.
With that said, let’s carry on with the review to see how this program performs. We will start by looking at the options education and then we will do a deep dive into the performance of the options alerts.
Education is essential for any investor, but it’s even more important in the volatile world of options trading. When you sign up for Motley Fool Options, you get instant access to OptionsU. OptionsU is a comprehensive options education program that covers a wide variety of topics.
Lessons are presented as videos or in-depth guides in text-format (depending on the lesson). The program is conveniently categorized into three levels:
- Options Essentials
- Options Strategies
- Options Masters
As you would guess, the material gets more advanced as you progress through the course.
The educational material covers just about everything you’d need to know to feel confident in your options trading knowledge. Topics include:
- Introduction to Options
- Buying Options
- Writing Options
- Using Options to Complement Stocks
- Advanced Options(Spreads, Diagonal Calls, Strangles, Straddles, etc.)
If you are new to options trading, it’s definitely worth going through the educational material from start to finish. If you want to make the most of the service’s options alerts, you should take the time to develop a foundational understanding of what you are trading. Even if you have been trading for a while, you will probably learn something new from these guides.
The course also comes with a few reference guides that can serve as good cheat sheets while you’re trading.
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Options alerts are the main feature of the Motley Fool Options service. The education is great, but the options alerts are what really justify the subscription fee.
Motley Fool issues a few new options recommendations every month. These options alerts are ideal for investors and swing traders. While day traders can benefit from the alerts, they are likely to prefer a more active service. In fact, one of the reasons Motley Fool Options stands out is because it utilizes a trading strategy that is easy to follow.
Most casual investors and traders don’t have the time to watch the market all day, every day. While Motley Fool Options picks require more management than stocks, they are relatively easy to manage. The team makes recommendations that are designed for longer-term traders so you don’t have to tend to your positions all day.
Types of Options Alerts
When I first signed up for Motley Fool Options, I expected it to be a very basic options alerts service. I expected to company to recommend a few long-term calls and puts on large-cap stocks. The service actually far more comprehensive.
The options recommendations use a broad range of options strategies. First off, the team recommends both buying and writing options. Depending on the alert, the team may recommend buying calls, writing puts, or some combination of the two.
Additionally, the recommendations go beyond straightforward call/put strategies. The team puts as much thought into the options strategy as they do the trade thesis. For example, if the team is bullish on Apple, they wouldn’t just say, “buy AAPL calls.” They would find an options strategy that maximizes upside while minimizing potential risk. Common alert types include:
- Basic calls/puts
- Covered calls
- Synthetic covered calls
- Diagonal calls
- Bull call spreads
- And more
If any of these strategies sound like gibberish to you, don’t worry. Everything is explained in both OptionsU and the actual options alerts. You also have the option to only follow recommendations that you are comfortable with. The team issues alerts for both basic options traders and advanced traders. You can pick and choose which ones are best for you.
The Motley Fool’s options alerts come in the form of reports (similar to the stock research reports from the company’s other services).
The report offers three essential sections:
- The trade thesis
- The options strategy
- How subscribers can follow the alert
The trade thesis explains the logic behind the recommendation. For example, if the team is making a recommendation that reflects a bullish sentiment towards Disney, they would explain why. They would cover details specific to the company and the industry.
The report also includes a section that explains the options strategy. This section explains why the specific options recommendation was made (i.e. why selling puts was recommended instead of buying calls). This section also includes a few alternative options strategies that members can follow. For example, they may offer a more aggressive strike price for traders who want more upfront cash from writing options. They may offer a covered call strategy as an alternative to writing puts. This section is both informative and educational for investors who want to understand how to pick effective options strategies.
Lastly, the report explains how subscribers can follow the alert. This section outlines the strategy and makes a recommendation for how much capital investors should allocate to the trade.
Motley Fool Options Performance and Track Record
Motley Fool Options provides comprehensive options trading education and well-researched options recommendations. Now, we get to the most important part of the review. How well do these options recommendations perform?
The first point worth noting is that The Motley Fool isn’t some brand new service trying to lure customers in by flashing a few good trades. The company has been around for almost 30 years and their entire reputation depends on their ability to make good investment recommendations.
Motley Fool Options was launched in 2009 so the service has a long track record for us to analyze.
Overall, the options picks have an 85% profitability rate, meaning 85% of the recommendations resulted in a profit. This is impressive when you consider the volatile nature of options.
Due to the complex nature of some of these strategies, it is difficult to summarize the average return of each recommendation. Returns will vary based on which strategy you use, the size of your portfolio, and whether or not you use portfolio leverage. It should be noted that you can apply your own strategy to maximize gains and/or minimizes losses. For example, you may decide to cut all losing positions at 15-20% to mitigate risk.
Here’s a look at some of the closed positions from the past few years.
Overall, the options recommendations perform well and they don’t require as much active management as other options trading strategies I’ve used.
Is Motley Fool Options Worth It?
By this point, you should have a strong understanding of the Motley Fool Options service. As a member, you get access to well-researched options recommendations that have a strong record. You also get access to an options education program that can help you become a more confident options trader.
The next obvious question is – is the service worth the price?
This is definitely on the higher-end for Motley Fool services, but it’s in line with the pricing of competing services. We’ve reviewed options services that cost upwards of $3,000! That said, this program is less affordable than the Stock Advisor program and it will cater to a different type of investor.
We believe the program justifies the subscription price, but the true value is dependent on your personal financial resources. If you have $1,000 in your investment portfolio, you are going to have a hard time recouping your subscription fee by following alerts. If you have more investment capital, you should be able to recoup the subscription fee with a few trades.
Motley Fool Options has an 85% win rate, with recommendations regularly returning 25%, 50%, and 75%. How much is that worth to you?
Motley Fool Options Review: Final Verdict
We have reviewed a handful of options trading services and we were impressed with everything we uncovered in our Motley Fool Options review. The service stands out for a few reasons.
First, it is backed by The Motley Fool and has a 10+ year track record. I definitely trust the Fool more than I trust brand new companies who launch a service out of thin air. The service has a great track record, the team is transparent with all of their alerts, and the recommendations have an 85% profitability rate.
Second, the service provides options education so that options traders can build a strong foundation and continue to expand their skillsets.
Lastly, the alerts themselves are easy to understand and follow. Many of the options alerts services we have reviewed have been focused on shorter-term options trades. While these alerts are excellent for active traders, they are difficult to manage and do not appeal to the masses. The Motley Fool team does a good job of providing well-researched alerts that mitigate risk and require minimal attention.
If you are looking for a great options alerts and education service, you can’t go wrong with Motley Fool Options.