What Is the Best Options Trading Advisory Service?

Updated on September 16, 2018
Daniel Mollat profile image

Daniel is a retired business executive who now devotes most of his free time to trading stocks and stock options in the stock market.

For those who are not familiar with stock and option advisory services, also called pickers, these are online services that offer to pick stock or options for clients based on the clients’ investment goals. I mention only stocks or options in this article since these are my investment specialties. But I’m sure there are also mutual fund pickers, bond pickers, and pickers for futures, forex, commodities, indexes, and others.

For this article, I will only be talking about stock and option pickers. While they basically offer the service of picking stocks or options according to the investment objectives of their client they prefer to call themselves advisory services rather than pickers. In effect, they do serve the function of advising the client what stock or options to buy or sell.

They are not to be confused with licensed financial advisers.

Licensed financial advisers are licensed professionals who are regulated by local or national governmental agencies and/or are certified practitioners. Investopedia.com defines financial advisers as:

“A financial advisor or adviser provides financial advice or guidance to customers for compensation. Financial advisors can provide many different services, such as investment management, income tax preparation and estate planning. They must carry the Series 65 license to conduct business with the public; a wide variety of licenses are available for the services provided by a financial advisor.”

A financial adviser therefore offers its client a package of services whereas a picker offers only the service of picking a particular stock or option on a particular industry or segment of the stock market. For instance, an investor may wish to find a stock to buy in the oil drilling industry. He goes online and searches for stock pickers or advisory services that specialize in recommending stocks in the oil drilling industry. In the same way the investor who wishes to invest in banking stocks can find stock pickers specializing in banking stocks.

In the case of options, since there is a multitude of strategies employed in trading options, option pickers do not normally specialize in any industry but rather more on the trading system being employed by the advisory service. For instance there are advisory services that specialize in selecting options for straight buying or selling of options. This is also known as directional option buying or selling. This option strategy is called going long (for buyers) or going short (for sellers). Another picker may specialize in selecting options for covered call selling, another may use spread trading, or any of the dozens of other trading systems available in the options business.

The Role of The Advisory Service

What exactly is the role of the so-called advisory service? In short they are supposed to find and recommend the right stock or option that will provide the desired result sought by the client.

In what way do they claim to do a better job of selecting winners?

They claim to have all the necessary technology such as advanced computer software, algorithms and deep research materials that enable them to do a much better job of locating the right stocks and options. Admittedly they do not claim to be always right in their selections, only that they will do a better job of finding the best potentials most of the time.

Exercise Caution in Selecting Advisory Services

If you choose to use a stock or option advisory service you must be extremely careful in your choice. Pickers, or advisory services, can be very deceiving in their online presentations to lure prospective clients to their services. Many, in fact, most of them, exaggerate their successful trades or wins when they present their track records or performance results. They are always quiet on the number of unsuccessful or losing trades

They employ various ways to present a very favorable track record with the sole purpose of deceiving the visitor into believing their numbers. Many don’t even show track records on their websites and these, in my opinion, are the ones that should be avoided immediately in your search for an advisory service.

Especially, don't be misled by their client testimonials. Please see my other article on the subject of testimonials.

That said, it does happen that a picker may, in fact, be a good one even if it shows no track record in its website. The only way to know about them is by word of mouth from someone who has already tried them successfully. Don’t get me wrong. There are a few that really do render a valuable service. It’s just a matter of finding them

So, how does one go about finding a good picker? I’m afraid it’s a hit or miss system. For stocks you can google ‘stock picking service’ or ‘stock advisory service’ and you will come up with quite a selection. For options, you can do the same thing. Google ‘stock options picking service’ or ‘stock options advisory service’.

Since my specialty is stock options I may be a little more help in this area. In January of 2017 I decided to do a study of the various option picking services to see which ones were worth subscribing to. Using Google to do my search I found 16 online sites worth investigating. There were actually a lot more than just 16 but only 16 were worth investigating in my opinion. After studying each and every one of them I narrowed down my selection to 11 pickers. I then subscribed to the services of these eleven. Shown below are the results of my trades with these eleven pickers.

The trades column are the number of trades I did following the signals given by each picker. The next columns show the number of winning and losing trades as well as the net dollar gain or loss resulting from the total trades for that picker. In order to make the comparisons fair and meaningful, I invested the same amount - $1,000 - on each trade.

As you can see from the table, except for two pickers, all listed pickers delivered losses. Looking at the numbers, OptionAlarm is the clear winner in the contest with Steady Options coming in second place. Steady Options offers a very conservative and safe trading system but is difficult to follow if you are just following option picks. They require a deep knowledge of the system they use and in most cases leaves it up to the client to decide when and how to enter and exit their selected options. The pickers that show little trading activity I abandoned early in my study because they just didn’t show much potential and their investing method was not to my liking.

PowerOpt.com had more winning trades than losers yet the net dollar result was a loss. This is because their losers were much bigger than their winners thus ending negatively. On the other hand, you will note that Steady Options had more losing trades than winners yet ended positively with a net dollar profit. In this case this picker chose options that yielded larger winnings and smaller losers.

MCTO and OptionGenius also show good performance results but the latter’s trading may be a bit more complex for the newbie option trader. OptionGenius’ system is a very safe one for the conservative trader but requires a deeper knowledge of options.

I haven’t seen a similar study of actual trading performances by stock pickers. But looking at their various online sites their presentations run along parallel lines to those of option pickers. Many are both stock and option pickers at the same time.

As I said earlier, there are good and bad stock and option pickers, unfortunately, the bad ones seem to outnumber the good ones by a large margin. For an investor who does not have the time to do detailed research on which stocks and options to invest in, the right picker can offer a valuable service in leading him to the right selections.

Staying at Your Computer is Critical

One thing to keep in mind is the time you spend in front of your computer. Many, in fact, most of the options pickers will send out their email signals any time during stock market hours. If you are not at your computer when the email comes in and you are not able to do the trade immediately it is often too late to try and catch up. The option may have already moved significantly against the signal. This has happened to me repeatedly and when I tried to chase the trades they became losers.

This case of needing to be quick in executing options signals may not be as critical with some combination option strategies. Trading spreads, covered calls/puts, condors, butterflies, etc. are not so time sensitive. I have missed this kind of trade signals from late emails but by placing a “good-till-canceled” order I often was able to chase and get the price indicated by the signal.

Investor Poll

Have you or are your subscribed to any advisory service?

See results

Note:

Any and all information pertaining to trading stocks and options including examples using actual securities and price data are strictly for illustrative and educational purposes only and should not be construed as complete, precise or current. The writer is not a stockbroker or financial advisor and as such does not endorse, recommend or solicit to buy or sell securities. Consult the appropriate professional advisor for more complete and current information.

Questions & Answers

  • Do you think OptionAlarm is the best choice for a stock option picker?

    I would be very reluctant to identify specifically who the best picker is. During the period covered by my survey OptionAlarm came out as a clear leader if you are looking for a directional option picker. If you are an options spread trader then SteadyOptions and OptionGenius appear to be good pickers for this trading strategy. As mentioned in the article there are numerous options trading strategies that one can employ and each of these strategies may have several option pickers that specialize in them.

  • You mentioned directional option buying or selling. What did you mean by this?

    A directional trade is one where the trader/investor is betting on the direction a stock is going or will be going. For example: An investor believes that Apple stock is poised to go up in the next few weeks or months. He is betting that Apple will go in an upward direction. Thus, he buys Apple stock as a directional trade transaction. He can also buy call options on Apple as a directional trade. Somebody else may feel exactly the opposite and buys put options as a directional play where he believes Apple stock is headed in a downward direction.

© 2018 Daniel Mollat

Comments

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    • profile image

      Daniel Mollat 

      6 weeks ago

      Doug, thanks for posting a comment but the best stocks options service depends a lot on the trading system you wish to pursue and your risk tolerance. This article only gives you some thoughts on those I have explored. There are many others I'm not familiar with.

    • profile image

      Doug Smith 

      6 weeks ago

      What are the best stock options trading services?

    • profile image

      Kim Klaiman 

      3 months ago

      Dear Daniel,

      We are honored to be among the only two profitable services.

      There are few things worth mentioning:

      First, based on our records, you were our member for only 3 months. As you mentioned, it takes time to learn our trading system, and members who stick around usually improve their results significantly over time.

      Second, it is important to compare apples to apples. You mentioned that "In order to make the comparisons fair and meaningful I invested the same amount - $1,000 - on each trade." This still doesn't make the comparisons fair. Why? Because the risk is completely different.

      Looking at the track record of the first ranker, you can see that around 25% of their trades are 100% losers. In fact, it is not uncommon for them to have five consecutive 100% losers.

      Imagine you joined in February 2017 and allocated 10% of your account to each trade. Two months later, your account would lose 50%. While the overall track record is indeed impressive, you just cannot ignore the risk.

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