Motley Fool Options Review
Motley Fool Options is an options-picking service created by the renowned team of investors at Motley Fool. While the Fool is well-known for their Stock Advisor service, Motley Fool Options represents the company’s attempt at creating a similar service for options trader/investors. Is the service worth the money? Read our review to find out.
About Motley Fool Options
The Motley Fool is one of the most recognized names in the world of financial media. Motley Fool is a stock market news company and premium investment advisory service.
The company is well-known for their Stock Advisor and Rule Breaker services, which have been providing stock picks that have outperformed the market for over a decade. While these services are the Fool’s flagship offerings, the company also offers a range of premium services that specialize in different types of investment strategies.
Today, we are going to look at Motley Fool Options.
As implied by the name, Motley Fool Options is a service that caters to options traders. Motley Fool Options offers options education, investment strategies, and most importantly, options trade alerts. Whereas Stock Advisor and Rule Breakers are stock-picking services, Motley Fool options is an options-picking service.
Is the service worth paying for? Keep reading our Motley Fool Options review to find out.
Who is Motley Fool Options For?
Before we dive deeper into the review, let’s discuss which type of investors and traders will benefit most from a Motley Fool Options subscription.
Most beginner investors stick to investing in stocks because it is a simple, straightforward process. You buy strong companies, hope they go up in price, and sell your shares for a profit. Options are a bit trickier.
We could spend all day talking about how options work but for the sake of this review, we will just provide a basic overview for anyone who is new to options trading.
An option is a contract that gives you the right to buy a stock, but not the obligation. There are a few different types of options, the most common being calls and puts. A call option gives you the right to buy a stock at a certain price (within a certain timeframe) and a put option gives you the right to sell a stock at a certain price (within a certain timeframe).
Let’s say you bought Apple’s stock at $120/share and you want to hedge your position against downside risk. You may purchase put options at $110/share. These options give you the right to sell Apple at $110 share, meaning your risk is capped at $10/share ($120 entry price minus $110 put strike price).
While options have a lot of practical applications in the world of investing, they are becoming increasingly popular as a standalone trading instrument. Options are exceptionally volatile meaning they can make big moves quickly. It’s not uncommon for an option contract to return 100%, 200%, or more in a day. On the flip side, many options expire worthless, meaning you can lose 100% of your initial investment.
Options are riskier than stocks so they are only suitable for certain types of investors. Motley Fool Options is most suitable for the following types of investors:
- Investors who love volatility – If you are going to trade options, you have to appreciate volatility. If you like investments that may experience 50-100% swings, options are a great choice for you. While some options investment strategies are less risky than others, almost every options investment carries more risk than a stock investment.
- Options traders – If you already trade options, Motley Fool Options can be a great service to help you find great option alerts on a regular basis.
- Investors looking to start dabbling in options – If you are trying to break into the world of options trading, Motley Fool’s service can help you do it the right way. As a new options trader, you will benefit greatly from having the guidance of an experienced team. The service provides alerts for a range of different options trading strategies.
Think Motley Fool Options could be a good fit for you? Keep reading our review to learn more about what the service offers and how it performs.
What Do Motley Fool Options Subscribers Get?
Motley Fool Options offers two main resources: education and alerts. Let’s take a closer look.
Options can be confusing, especially when you are just starting out. If you are new to options trading, you need a proper education. Even if you have been trading options for a while, you probably don’t know everything there is to know.
Motley Fool offers options trading education ranging from beginner material to advanced strategy lessons. The lessons are organized into three categories under “Options U.”
- Essentials – Learn the basics of options trading
- Strategies – Learn beginner and intermediate options trading strategies
- Masters – Learn advanced options trading strategies
Each of these courses is separated into different modules that offer in-depth guides. Here are some of the examples of the lessons in each section.
- What Are Options?
- Calls and Puts
- Buying Options
- Writing Options
- Exercising Options
- Trading Options Alongside Stocks
- Writing Covered Calls
- Buying Puts for Protection
- Writing Puts
- Diagonal Calls
- Bull Call Spreads
- Bearish Spreads
- Protective Collars
- Black-Scholes Pricing Model
As mentioned earlier, there is a ton of educational content that will be applicable to investors of all skill levels.
Options Alerts are the star of the Motley Fool Options service. If you’re paying for a subscription, you want actionable options trades alerts that make you money.
Members get access to a few new options alerts every month as well as a list of all previous alerts (some of which are still active).
These aren’t just basic recommendations to buy calls and puts. The Fool actually utilizes a range of advanced strategies.
Here are some of the types of options strategies that the service has applied in the past year:
- Covered Calls
- Written Puts
- Long Calls
- Bull Call Spreads
- Diagonal Calls
- Synthetic Covered Calls
If these options strategies sound intimidating to you, don’t worry. Each alert comes with an in-depth explanation. I was actually impressed by the depth and specificity of the options alerts.
Each alert comes in the form of a report that contains the following sections:
- Price Guidance
- Strategy Explanation
- Alternative Strategies
The action is the alert itself (i.e. sell $45 puts).
The allocation section advises members how much of their portfolio they should allocate towards the trade. (i.e. write one put for every $4,500 worth of shares you can afford).
The price guidance tells members how much they should pay for an option or sell it for. (i.e. sell $45 puts for $1.90/contract).
The above three sections are summarized in a “quick-view” section at the top of the alert report. Here is an example from one of the alerts from 2019:
For investors that want more detail on the trade recommendation, Motley Fool delivers.
The rationale section contains an in-depth explanation of why this particular alert was made. For example, if the team is recommending a bullish option, they will make the bull case for the underlying stock.
The strategy explanation section explains why the particular options trading strategy was used (i.e. selling puts vs. buying calls).
The alternative strategies section offers alternative options trades rooted around the same trade thesis. For example, if you don’t want to sell puts, you could set up covered calls. If a strike price is too risky/conservative for your taste, you can adjust it.
Overall, the options alerts are incredibly thorough and well-explained.
Motley Fool Options Track Record
Now that you know what you get as a Motley Fool Options member, you probably want to know whether or not the service delivers.
Subscribers have access to a record of every option pick the company has ever made. Overall, 84.6% of the picks have yielded positive returns.
An analysis of the past 20 trade alerts shows that the worst performer returned -100% and the top performer returned 255%. Both of these represent extreme results and the majority of the other picks returned 20-30% (many of which are still active).
Motley Fool may issue and revise multiple options alerts. Members will receive alerts when it is time to close a position. Here is an example of a strategy that was executed over a year:
Overall, the winning picks far outnumber the losing picks and the winning returns are much higher than the losses. Of course, some options will go to zero, especially if you buy volatile calls and puts with short-term expirations, but based on the Fool’s track record, these types of results are rare.
Motley Fool Options Pricing
Motley Fool Options is available for $999/year. The company will run the occasional sale that brings the price down to $899/year.
Unlike other Motley Fool services, there is not a monthly subscription available. After reviewing the team’s trading style, this is understandable. Motley Fool Options utilizes a more active trading style than the company’s other services (like Stock Advisor). While some of the picks are “set and forget,” others require more maintenance. You really need year-round access to make the most of the service.
The service comes with a 30-day satisfaction guarantee. If you are unhappy with the service after 30 days, you can get a credit for the full price of your membership fee. This isn’t a straight-up refund. It’s a credit that can be applied to other Motley Fool services.
Is Motley Fool Options Worth the Money?
At $999/year, Motley Fool Options is definitely worth the money for certain types of investors/traders.
With certain picks returning upwards of 100%, you can easily make back the subscription fee in a few trades. That said, you should make sure the service is a good fit first.
Here are some considerations:
- You should be prepared to take some time to learn about options if you are new to options trading. Motley Fool provides the resources you need, but you need to put in the time.
- You should be okay with a more active approach to trading. Motley Fool doesn’t utilize a super active approach to options trading, but it’s more active than simply buying and holding stocks. Prepare to review your portfolio and check in with the service weekly for updates.
- You should consider your portfolio size relative to the membership fee. For example, if you have $5,000 in your portfolio, you need to make an extra 20% in a year to breakeven on your membership fee (which is doable). If you only have $2,000, you will need to make an extra 50%, which is much more difficult. The more capital you have to allocate to options trading, the more value you will get out of the service.
Motley Fool Options Review: Final Verdict
Hopefully, our Motley Fool Options review has helped you better understand the service and its key offerings. Motley Fool Options provides options education and alerts for traders of all different skill levels.
During our review, we were most impressed with two things – the depth of the reports and the transparency of the track record.
The reports are well-researched and well-explained, making it easy for members to follow the alert and understand why they are following it.
The track record shows the true performance of the service’s strategy and gives members access to historical alerts that may still be relevant.
Overall, Motley Fool Options is a great service that is definitely worth trying if you are interested in options trading.