Advertiser Disclosure

Investing

7 Popular Options Trading Strategies

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

bills in a jar
iStock

Options are one of the most exciting areas of the investing world because of their potential for huge gains. But to get started, you’ll want to know what options strategies are available, when they’re best suited to particular situations, and what the risks and rewards are.

Options strategies come in a variety of flavors, but they’re all based on the two fundamental options: calls and puts. From these basics, investors can create a range of strategies that maximize the payout from a stock’s movement, and savvy investors pick the strategy that’s best for how they expect the stock to perform.

Below are seven of the most popular strategies, ranging from basic to modestly complex.

1. The long put

The long put is an options strategy where the trader buys a put expecting the stock to be below the strike price before expiration.

Best to use when: The long put is a useful strategy when you expect the stock to decline and you want to earn large upside. Traders will earn a significantly better return on their investment than by short selling the stock, so a long put could be a good substitute for shorting the stock directly. The long put also limits the short seller’s loss to the premium, while shorting the stock exposes the trader to uncapped losses.

Example of the long put: STK stock trades at $100 per share, and puts with a $100 strike price are available for $10 with an expiration in six months. One put costs $1,000 (one contract * 100 shares * the $10 premium).

Here’s the return at each stock price, including the cost to set up the position.

Stock price at expirationLong put’s profit

$130

-$1,000

$120

-$1,000

$110

-$1,000

$100

-$1,000

$90

$0

$80

$1,000

$70

$2,000

Risk/reward: The long put can pay off significantly if the stock moves below the strike price before the option expires. In this example, the maximum return is 10 times the original investment, or $10,000. In general, the maximum value of the long put equals the total value of stock underlying the trade (the number of contracts * 100 * the strike price).

The risk for this potential upside is a complete loss of the premium paid for the put. But if the stock moves higher, making the put less valuable, traders often can salvage some of the value by selling the put, as long as it has substantial time to expiration.

2. The long call

With the long call, the trader buys a call expecting the stock to be above the strike price before expiration.

Best to use when: The long call is much like the long put, but it pays out when the stock rises. So if you’re expecting the stock to move higher, the long call is the way to go. The long call can earn a much higher percentage return than owning the stock directly.

Because the trader’s downside is limited to the option’s premium, the long call also could be a good strategy if the stock has the potential to move much higher but has the potential to move much lower too. If the stock falls, the option’s limited loss could be less than owning the stock directly.

Example of the long call: STK stock trades at $100 per share, and calls with a $100 strike price are available for $10 with an expiration in six months. One call costs $1,000 (one contract * 100 shares * the $10 premium).

Here’s the profit at each stock price, including the cost to set up the position.

Stock price at expirationLong call’s profit

$130

$2,000

$120

$1,000

$110

$0

$100

-$1,000

$90

-$1,000

$80

-$1,000

$70

-$1,000

Risk/reward: The long call has uncapped upside as the stock moves higher, and that’s why this strategy can be a home run. If a stock rises, you can make many times your investment.

Like the long put, the risk here is that the investor could lose all of the premium paid for the call. However, if the stock moves lower — making the call less valuable — traders often can save some of the value by selling the call, as long as it has substantial time remaining to expiration.

3. The short put

In a short put, the trader sells a put expecting the stock to be higher than the strike price by expiration. This is similar to selling insurance against the stock falling below the strike price.

Best to use when: There are two good situations for the short put.

  • If the trader expects the stock to be above the strike price at expiration, the short put is a way to generate income by pocketing the premium.
  • The trader can use the short put to achieve a more attractive buy price on the underlying stock. If the stock doesn’t move below the strike price, the trader keeps the premium and can execute the strategy again. If the stock falls below the strike, the trader buys the stock at a discount to the strike price, using the premium to reduce the net price paid.

Example of the short put: STK stock trades at $100 per share, and puts with a $100 strike price are available for $10 with an expiration in six months. One put generates a total premium of $1,000 (one contract * 100 shares * $10 premium).

Here’s the profit at each price, including the cost to set up the position.

Stock price at expirationShort put’s profit

$130

$1,000

$120

$1,000

$110

$1,000

$100

$1,000

$90

$0

$80

-$1,000

$70

-$2,000

Risk/reward: The short put’s maximum payoff is the premium received by the trader. The stock might fall well below the strike price, but all the short put earns is the premium. The maximum payoff occurs anywhere above the strike price.

The downside for the short put can be substantial, and the trader can be forced to add money in order to close out the trade if there’s not enough to purchase the stock at the strike price. The maximum downside occurs when the stock goes to zero. In this example, the put would lose $10,000 (100 shares * the $100 stock * the one contract), though the investor would still have the $1,000 premium. Short puts can be risky with limited upside.

4. The covered call

In order to create a covered call, the trader sells call options for each 100 shares of the underlying stock owned. The investor expects the stock to remain relatively flat, allowing the call to expire worthless. This allows the trader to pocket the premium without having to sell the stock at the strike price.

Best to use when: The covered call can be an effective strategy for generating income when the investor owns the stock and expects it to remain relatively flat over the life of the option.

The covered call also can be an “exit strategy” for a position, with the investor selling calls for a strike price that they would be willing to receive and getting to pocket the extra premium.

Example of the covered call: STK stock trades at $100 per share, and calls with a $100 strike price are available for $10 with an expiration in six months. One call generates $1,000 in premium (one contract * $10 premium * 100 shares), and the investor sells one call for each 100 shares of the stock owned.

Here’s the return at each stock price, including the cost to set up the position.

Stock price at expirationStock’s profitCall’s profitTotal profit

$130

$3,000

-$2,000

$1,000

$120

$2,000

-$1,000

$1,000

$110

$1,000

$0

$1,000

$100

$0

$1,000

$1,000

$90

-$1,000

$1,000

$0

$80

-$2,000

$1,000

-$1,000

$70

-$3,000

$1,000

-$2,000

Risk/reward: The covered call’s maximum payoff is the premium received. This occurs right at the strike price, allowing the option seller to keep the premium without having to sell the underlying stock or losing any money on it.

There are two potential downsides for the covered call.

  • Profit that otherwise would have been made on the stock is the first downside. If the stock rises above the strike price, the investor could have realized those gains but instead loses all the stock’s upside for the duration of the covered call.
  • The trader must assume any downside risk on the stock. So if it falls, the trader can suffer there as well.

5. The married put

When using a married put, the trader buys put options on a stock for each 100 shares of the underlying stock owned. The investor suspects the stock may fall in the short term but wants to continue owning it because it may rise significantly. So the married put protects the investor’s downside.

Best to use when: There are two scenarios where the married put works well.

  • The investor expects the stock could move in either direction in the short term (because of some impending news, for instance) but wants to own it for the long term. So the put allows the investor to profit from the expected temporary fall in the stock.
  • The investor may not want to sell the stock for some other reason (such as taxes, for example), and the married put allows the investor to profit from the decline without having to sell the stock.

Example of the married put: STK stock trades at $100 per share, and puts with a $100 strike price are available for $10 with an expiration in six months. One put costs $1,000 (one contract * $10 * 100 shares), and the investor buys one put for each 100 shares of the stock owned.

Here’s the return at each stock price, including the cost to set up the position.

Stock price at expirationStock’s profitPut’s profitTotal profit

$130

$3,000

-$1,000

$2,000

$120

$2,000

-$1,000

$1,000

$110

$1,000

-$1,000

$0

$100

$0

-$1,000

-$1,000

$90

-$1,000

$0

-$1,000

$80

-$2,000

$1,000

-$1,000

$70

-$3,000

$2,000

-$1,000

Risk/reward: The married put’s maximum total profit is unlimited if the stock moves higher. The whole point of the married put is to allow the investor to gain the potential upside by paying for “insurance.” If the stock moves lower, then the put increases in value to offset that loss.

The maximum downside is the lost premium. The married put is a hedged position, and the investor expects to lose money on one end of the hedge. The trader pays the option’s premium, and if that’s the maximum loss, then it’s a good thing.

6. The long straddle

The long straddle is a strategy where the trader buys an at-the-money call and an at-the-money put with the same expiration and the same strike price. The trader suspects the stock may move significantly but is not sure in which direction.

Best to use when: The long straddle is a strategy that’s useful when you expect the stock to be volatile but it’s difficult to determine which direction it’s going. A long straddle costs a lot to set up and requires a big move in order to profit.

Example of the long straddle: STK stock trades at $100 per share. There are puts and calls with a $100 strike price available for $10 with an expiration in six months. The total cost of the trade is $2,000, consisting of the put (one contract * $10 * 100 shares) and the call (one contract * $10 * 100 shares).

Here’s the profit profile, including the cost to set up the position.

Stock price at expirationCall’s profitPut’s profitTotal profit

$130

$2,000

-$1,000

$1,000

$120

$1,000

-$1,000

$0

$110

$0

-$1,000

-$1,000

$100

-$1,000

-$1,000

-$2,000

$90

-$1,000

$0

-$1,000

$80

-$1,000

$1,000

$0

$70

-$1,000

$2,000

$1,000

Risk/reward: The long straddle can return a lot, and theoretically the return is uncapped if the stock soars. However, any profit will have to deduct the substantial cost to set up the trade, and this trade requires a stock to move big to make it profitable.

The downside of the long straddle is the complete loss of the premiums paid if the stock doesn’t move. However, if the stock moves even a little bit in either direction, the trader usually can recover some of the premium if there’s enough time until expiration on the options.

7. The long strangle

The long strangle is like the long straddle, but it’s cheaper to set up because it uses out-of-the-money options instead of at-the-money options. In the long strangle, an investor buys a call and a put option at prices above and below the current stock price, respectively. The trade-off, relative to the straddle, is that the stock must move even more for the strategy to work.

Best to use when: The long strangle is used when you expect the stock to move even more than you would when using a long straddle. So if you expect a big move in the stock, the long strangle can be cheaper to set up and deliver a higher percentage return than the straddle.

Example of the long strangle: STK stock trades at $100 per share, and puts with a $90 strike price are available for $5 with an expiration in six months. Calls with a $110 strike price are available for $5 with an expiration in six months. The total cost of the trade is $1,000, consisting of the put (one contract * $5 * 100 shares) and the call (one contract * $5 * 100 shares).

Here’s what the trade will return at expiration, including the cost to set up the position.

Stock price at expirationCall’s profitPut’s profitTotal profit

$130

$1,500

-$500

$1,000

$120

$500

-$500

$0

$110

-$500

-$500

-$1,000

$100

-$500

-$500

-$1,000

$90

-$500

-$500

-$1,000

$80

-$500

$500

$0

$70

-$500

$1,500

$1,000

Risk/reward: Like the long straddle, the long strangle can return a high percentage, theoretically uncapped if the stock rises. Similarly, it’s also a wager that the stock will move significantly in either direction, without the investor having a clear sense of which way. The main advantage of the strangle over the straddle is that it requires less money to set up.

The maximum downside of the long strangle is the complete loss of the premiums paid if the stock fails to move much. Because the options were purchased out of the money, it takes a more significant move to recapture some of the premium, though it is possible if time remains on the options.

Bottom line

These seven options strategies are among the most common, but there are many others that combine calls and puts into a strange mix of payoffs and risks. It can be a dizzying array, so if you’re looking to get started in the options world, take a look at MagnifyMoney’s guide on how to trade options.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

James F. Royal, Ph.D.
James F. Royal, Ph.D. |

James F. Royal, Ph.D. is a writer at MagnifyMoney. You can email James here

Advertiser Disclosure

Investing

Betterment Review 2019

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Robo-advisor Betterment uses exchange-traded funds (ETFs) and a high degree of automation to manage your portfolio. In addition, it’s possible to speak with financial professionals to receive more tailored advice on retirement and other financial goals.

Investors most likely to benefit from Betterment include beginning investors hoping for a low barrier to entry, as well as intermediate investors who are interested in keeping a portion of their portfolio in set-it-and-forget-it accounts. Investors interested in trading individual stocks or taking a more hands-on approach aren’t likely to benefit as much from Betterment.

Betterment
Visit BettermentSecuredon Betterment’s secure site
The bottom line: Betterment is great for investors looking to get started with minimum fuss — and who aren’t interested in active trading.

  • Easy to get started
  • Set up different investing goals
  • Benefit from tax optimization

Who should consider Betterment

Betterment is for investors who would like an automated approach to investing. Anyone can benefit from Betterment, but it’s especially helpful for beginner investors hoping to start growing their wealth.

Because of the low barrier to entry — there are no account minimums and you can get started with a minimum deposit of $10 — it’s possible for almost anyone to begin investing.

It’s also a great resource for intermediate investors looking to accomplish different goals with “buckets” of money. With Betterment, it’s possible to set varying levels of risk for different goals, with different asset allocations based on when you’re likely to need the money.

Finally, intermediate and advanced traders can use Betterment to build a long-term retirement portfolio, although there is no active trading. Betterment offers a place for assets to grow over longer periods at a pace that is likely to track the market as a whole.

Consider your goals and what you hope to accomplish with your investment portfolio. While Betterment can potentially be a good choice for anyone who keeps a portion of their portfolio in long-term assets, it’s not ideal for those who prefer to actively manage their portfolios or engage in active trading.

Betterment fees and features

Amount minimum to open account
  • $0
Management fees
  • 0.25% for Digital offering (no minimum account balance)
  • 0.40% for Premium offering ($100,000 minimum account balance)
Account fees (annual, transfer, inactivity)
  • $0 annual fee
  • $0 full account transfer fee
  • $0 partial account transfer fee
  • $0 inactivity fee
Current promotions

Three months free for new customers who are referred by an existing Betterment account holder

Account types
  • Individual taxable
  • Traditional IRA
  • Roth IRA
  • Joint taxable
  • Rollover IRA
  • Rollover Roth IRA
  • SEP IRA
  • Trust
Portfolio
  • 12 asset classes represented in ETF portfolio
Automatic rebalancing
Tax loss harvesting
Offers fractional shares
Ease of use
Mobile appiOS, Android
Customer supportPhone, Email

Management fees

Betterment’s pricing starts with a 0.25% management fee for the basic Digital account. This pricing is in line with other robo-advisors like Wealthfront, which also charges 0.25%.

Balances above $100,000 earn Betterment’s Premium account status, featuring unlimited access to personalized advice for a management fee of 0.40%. This isn’t out of line with other robo-advisors: Wealthsimple charges 0.40% for account balances above $100,000. Wealthfront, however, maintains the 0.25% management fee, no matter the size of your account. Once your balance reaches $2 million, your fee drops to 0.15%.

In addition to regular management fees, it’s also important to note that you’ll pay expense ratios on the ETFs Betterment selects on your behalf. Betterment’s recommended portfolios feature expense ratios of 0.07% to 0.15%. According to Betterment, this is much lower than the industry average.

Finally, there are additional fees if you want access to specialized financial planning. If you have $100,000 or more invested with Betterment, you get access to these services as part of your annual management fee. However, if your balance is lower, you pay a flat fee for financial advice ranging between $199 and $299 per advisory session.

Portfolio options and portfolio management

Betterment chooses an investment portfolio for you based on your goals and time horizon. The core portfolio includes stock and bond ETFs allocated in a way that helps you reach your goals. It’s also possible to tweak your asset allocation in your account.

In addition, Betterment offers different portfolio options based on specific goals and targets. Here are some of the additional choices available with Betterment:

  • Socially Responsible Investing (SRI): This portfolio focuses on reducing exposure to companies that have a negative social impact. The expense ratio is a little higher with these portfolios, around 0.14% to 0.22%, depending on the allocation within the portfolio.
  • BlackRock Target Income Portfolio: Aimed at retirees, this portfolio is designed to provide a regular income stream. The portfolio focuses on bond investments that offer dividends that can be used for income rather than focusing on principal and capital appreciation.
  • Goldman Sachs Smart Beta Portfolio: Rather than using basic asset allocation principles, this portfolio focuses on assets that possess four characteristics considered to drive performance — strong momentum, good value, low volatility and high quality. It’s possible to adjust this portfolio in 101 different ways.

With all portfolios, Betterment handles automatic rebalancing when your assets experience a certain amount of drift. For example, if market performance is resulting in an asset allocation that is too far outside the target for your portfolio, Betterment will sell and buy different assets to bring your portfolio back to its target.

Another way Betterment automatically manages your portfolio is by using tax optimization strategies. Different assets are assigned to your accounts based on their overall tax efficiency. Additionally, when certain assets lose value, Betterment will sell them automatically in an effort to offset capital gains in other areas. With the help of the Tax Loss Harvesting+ feature, rebalancing can occur daily.

Financial planning features

If you want a big-picture view of your finances, Betterment’s account sync feature can be helpful. With this feature, you connect some or all of your outside accounts to Betterment, which lets you view all of your financial information in one place. The app then offers personalized recommendations for managing your money.

You have the option to speak with Betterment financial professionals about planning for specific goals and life milestones. Account holders above the $100,000 balance requirement get unlimited access to personalized advice and help by phone and email as part of the management fee.

If you don’t meet this threshold, you can pay for advice packages tailored to the goals you’re working on. Here are some of the Betterment advice packages available for a flat fee:

  • Getting Started: A 45-minute phone call with a certified financial planner (CFP) who can provide step-by-step help setting up a Betterment account that helps you maximize a variety of goals. Price: $199.
  • Financial Checkup: Get a review of your investment portfolio and how it fits into your financial situation in a 60-minute call with a Certified Financial Planner. Price: $299.
  • College Planning: Aimed at families who want help getting set up for college costs and using higher education plans. It consists of a 60-minute phone call that can help you review your choices and decide what’s best for you. Price: $299.
  • Marriage Planning: Planning to tie the knot soon? Get help as you navigate goals, priorities and merging finances in a 60-minute phone call. Price: $299.
  • Retirement Planning: Set up a 60-minute holistic review of your portfolio, current situation and more that can help you make better decisions for your retirement. Price: $299.

The Betterment Advisor Network can also help you get your own dedicated financial advisor who can help you with almost any financial need. Betterment will help match you with a professional who is likely to fit your goals and priorities.

Everyday Savings Account

Betterment offers Federal Deposit Insurance Corporation (FDIC)-insured banking options. While the checking account isn’t universally available yet, it is possible to use Everyday Savings to earn up to 2.04% APY. Additionally, there are no limits on withdrawals and no minimum balance. You also don’t have to worry about paying fees on your balance. The money in your Everyday Savings account is actually held at partner banks — it’s possible to opt out of a specific partner bank, if you wish.

In addition to providing a high-yield savings option, you can also decide to use the Two-Way Sweep feature. With this feature, Betterment automatically analyzes a connected account each day and will move excess cash from your connected account and into your savings account. If you need the money back in your main account, Betterment will sweep it from your Everyday Savings without the need to take further action on your part.

Strengths of Betterment

Betterment is always adding new goals and features. Here are some of the most helpful features it currently offers:

  • Tax optimization: Betterment uses tax loss harvesting to help offset taxes on your gains. The company also uses its Tax-Coordinated Portfolio to give you the maximum tax benefit. Certain assets are assigned to your IRA, while others are kept in your taxable accounts.
  • Betterment Everyday: Betterment now offers FDIC-insured checking and savings accounts. While the checking product is still in the roll-out stages, it’s possible to earn up to 2.04% APY with Everyday Savings.
  • Set up different goals: One of Betterment’s most useful features is the ability to set up different goals. It’s possible to have a traditional IRA and a rollover IRA, as well as open a Roth IRA. It’s also possible to open taxable accounts for a variety of other goals. Set different asset mixes for each type of account and adjust what you add simply and easily.
  • Chance to talk to a human: Betterment offers customer service by phone in addition to email. However, you can also speak with a financial professional with packages starting at $199, depending on what you’re looking for. It’s also possible to be matched with an advisor if you meet the requirements for access to the Betterment Advisor Network.
  • Portfolio projection tools: Set goals with the help of Betterment’s projection tools and track your progress toward reaching your objectives. Betterment offers insight into whether you’re on track with your goals as well as graphs to help you visualize the potential of your portfolio.

Drawbacks of Betterment

While Betterment is a great choice for many investors, it’s not for everyone. There are some drawbacks, and no Betterment review would be complete without mentioning them.

  • No active trading: If you’re interested in choosing your own investments and actively trading, you won’t be able to do that with Betterment. While you can do a little more self-directed investing with a Premium account, the reality is that you’re mostly limited to choosing your prefered asset mix rather than picking individual investments.
  • Lack of 529 and education savings accounts (ESAs): There are no custodial accounts with Betterment, and you can’t set up a 529 or ESA to save for your child’s education. A similar robo-investing company that does offer a 529 is Wealthfront.

Is Betterment safe?

Anytime you invest, there is a chance you could lose money. Poor market conditions can always lead to a loss. However, Betterment’s use of modern portfolio theory in its asset allocation helps reduce your exposure to risk. Additionally, Betterment carries Securities Investor Protection Corporation (SIPC) insurance, protecting each of your Betterment accounts up to $500,000 in the event of a failure by the company. (Note that market losses aren’t covered by SIPC insurance.)

In addition to making sure an investment company is SIPC-insured, you also can use the Financial Industry Regulatory Authority’s BrokerCheck to find out about disclosures and actions, and search the Consumer Financial Protection Bureau’s Consumer Complaint Database. The Better Business Bureau is also a good source of information.

Final thoughts

Betterment is a great choice for beginner investors looking to get their feet wet and for long-term investors hoping to grow a retirement portfolio. For investors with more than $100,000, it can also be a decent place to keep your money if you’re looking for basic advice.

However, for active traders and those who want a little more control over their assets, Betterment might not be the best choice. Instead, it could make more sense to use platforms like E-Trade or Robinhood if you want to get involved with active trading. Stockpile is also a good choice for investors who want to buy individual stocks using fractional shares.

Overall, though, Betterment is a great choice for building wealth for the long term, including setting accounts for specific goals and using tools that help you see if you’re on track to meet your objectives.

Open a Betterment accountSecured
on Betterment’s secure website

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Miranda Marquit
Miranda Marquit |

Miranda Marquit is a writer at MagnifyMoney. You can email Miranda here

Advertiser Disclosure

Investing

Ally Invest Review 2019

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Not having enough cash to open an online brokerage account can be seen as a barrier to starting your investing journey. If that’s a concern check out Ally Invest, which doesn’t have a minimum balance requirement.

Ally Invest is a good choice even if you don’t already have another account with Ally Bank. This online broker offers a wide range of account features, as well as a robo-advisor option. Take advantage of Ally Invest’s online platform and mobile app to track your investments whenever and wherever you wish.

Ally Invest
Visit AllySecuredon Ally Invest’s secure site
The Bottom Line: Ally Invest is an affordable broker with a wide range of investments to choose from.

  • Zero commissions on buying or selling ETFs, U.S. exchange-traded stock and options.
  • There’s no minimum deposit required for a self-directed trading account and no minimum account balance requirement.
  • Ally Invest offers tons of investment options, including stocks, bonds, mutual funds, options, futures and forex.
  • Managed portfolios don’t have advisory fees, annual charges or rebalancing fees.

Who should consider Ally Invest

If you’re new to investing, Ally Invest is a great option. It doesn’t have an account minimum to start, which lets you start investing even if you only have a few extra dollars. The managed portfolio — Ally’s take on a robo-advisor — requires $100 minimum to get started. The managed portfolio include a variety of individual retirement accounts (IRAs):

  • Individual
  • Joint
  • Traditional
  • Roth
  • Rollover
  • Custodial

Ally Invest is also a solid choice if you’re trying to minimize the impact fees have on your overall investments. Ally doesn’t charge trading commissions on exchange traded funds (ETFs), options or U.S. exchange-traded stocks.

Once you’ve opened your account, Ally Invest’s online trading platform and research tools are easy to use. While you won’t find earnings transcripts, SEC filings, earnings press releases or audio calls, you can still dig into technical data using free screeners and other tools powered by Recognia.

Ally Invest fees and features

Current promotions

New Ally Invest accounts accounts receive 90 days of commission-free trades, up to $500 in value, regardless of deposit amount. Cash bonuses are available for new accounts starting at $50 for if you deposit or transfer at least $10,000.

Stock trading fees
  • $0.00 per trade
Amount minimum to open account
  • $0
Tradable securities
  • Stocks
  • ETFs
  • Mutual funds
  • Bonds
  • Options
  • Futures / commodities
  • Forex
Account fees (annual, transfer, inactivity)
  • $0 annual fee
  • $50 full account transfer fee
  • $50 partial account transfer fee
  • $0 inactivity fee
Commission-free ETFs offered
Mutual funds (no transaction fee) offered
Offers automated portfolio/robo-advisor
Account types
  • Individual taxable
  • Traditional IRA
  • Roth IRA
  • 529 Plan
  • Joint taxable
  • Rollover IRA
  • Rollover Roth IRA
  • Coverdell Education Savings Account(ESA)
  • Custodial Uniform Gifts to Minors Act (UGMA)/Uniform Transfers to Minors Act (UTMA)
  • SEP IRA
  • SIMPLE IRA (Savings Incentive Match Plan for Employees)
  • Trust
Ease of use
Mobile appiOS, Android , Windows phone
Customer supportPhone, 24/7 live support, Chat, Email

Commissions and fees

Online brokers, including Ally Invest, have reduced trading commissions to zero on a wide range of assets. As mentioned above, Ally Invest offers commission-free trading of ETFs, U.S. exchange-traded stock and options. However, the online broker still charges some fees:

  • Bonds: $1.00 per trade
  • Mutual funds: $9.95 per trade
  • Margin accounts: Varies
  • IRA transfer fee: $50
  • IRA closure fee: $25
  • Returned checks, ACH or wires: $30
  • Paper statements: $4
  • Restricted accounts and broker-assisted trades: $20 plus commission
  • Short stock: daily charge at cost
  • ATM withdrawals: $1

Additionally, Ally Invest will reimburse you up to $150 in transfer fees you might accrue from your current brokerage firm.

Fees mentioned in the article are accurate as of the date of publishing.

Tradable asset categories

Ally Invest allows you to trade a variety of asset classes, including:

  • Stocks
  • ETFs
  • Options (equity and index)
  • Mutual funds
  • Bonds
  • Margin account
  • Forex

If you’d rather take a hands-off approach, you can look into managed portfolios, which is Ally’s version of a robo-advisor. There are four different portfolio types:

  • Core: A variety of diversified choices, including international, domestic and fixed-income assets. You can choose your risk tolerance, from conservative to aggressive.
  • Income: If you’re in retirement or close to it, this option allows you to take a conservative risk tolerance with higher dividend returns.
  • Tax optimized: If you earn a lot of money, you can make after-tax contributions to your investment account, which can lower your tax bill and maximize investments.
  • Socially responsible: This account is filled with ethical companies that practice sustainability, energy efficiency or other initiatives that are good for the environment.

While these portfolios are managed and rebalanced algorithmically by computers like other robo-advisors, Ally Invest says that live financial analysts design its portfolios.

Trading technology and experience

Ally Invest allows you to set up an investing platform with customizable features that work best for you. You can create custom watchlists to observe market data that’s relevant to your investments. This also helps you monitor particular stocks or other investments — if they drop to a favorable amount, you can jump in to buy. Other technology highlights include:

  • Profit/loss graph: If you’re interested in a particular investment, the profit/loss graph gives you the chance to see the potential of it before buying. This is helpful if you’re considering an investment but want to determine whether it’ll earn you money without actually putting money towards it.
  • Market data: When you’re looking to learn more about a company, your investment platform lets you check company quotes, charts, high and low prices, dividend dates, peer performance comparisons and other news about the company.
  • Probability calculator: Unsure about an investment’s potential performance? This lets you check the volatility of it and see if it will help you hit your investment goals.

Ally Invest has mobile apps for iOS and Android users, or you can log in to your account through your mobile browser to use the Ally Invest LIVE platform. From there, you can check your watchlist and stream quotes.

You can also check quotes, charts, earnings, company news and more when you log in to your account and click “Research.”

Strengths of Ally Invest

Ally Invest has plenty of strengths to help it stand out from the competition, including the following:

  • No minimum deposit required: Ally Invest doesn’t have a minimum initial deposit requirement, which makes it simple to get started with only a little cash. You can also earn a cash bonus for opening an Ally Invest account if you deposit or transfer just $10,000, compared with a $25,000 minimum to earn a cash bonus with E*Trade or $20,000 with Merrill Edge.
  • Powerful tools and intuitive trading platform: Ally Invest’s online site offers you powerful tools to screen investments. Its trading platform is intuitive and provides the features necessary to be an informed investor. This includes a dashboard you can customize to your preferred view, as well as real-time streaming quotes and up-to-date data.
  • Responsive online and phone customer service: Ally Invest can be contacted via phone 24/7. There’s also an online chat feature, where you can get answers within seconds from helpful customer service agents. Email support is available, as well.
  • Hundreds of ETFs. Ally Invest offers 500+ ETFs from Vanguard, GlobalX, iShares and others.

Drawbacks of Ally Invest

Ally Invest also has some downsides to consider:

  • Mutual fund transaction fees: Ally Invest charges a $9.95 transaction fee per trade for no-load mutual funds. But many competitors offer options without any transaction fees, including E*Trade, which offers more than 4,400 fee-free funds.
  • A mobile app with minimal features: While you can do the basics with Ally Invest’s mobile app, it offers far fewer features and investment tools than competitor apps such as TD Ameritrade Mobile.
  • No physical branches: Ally Invest is an online-only company. There are no physical branches, unlike competitors such as Merrill Edge or E-Trade, which has more than 30 branches spread across the country.

Is Ally Invest safe?

Ally Invest is a trusted online brokerage with more than $4.7 billion in assets under management. It’s a member of the Federal Deposit Insurance Corporation (FDIC) and the Securities Investor Protection Corporation (SIPC), so you can rest assured that the cash in your accounts is safe. And since the company has passed its Financial Industry Regulatory Authority (FINRA) broker check, you can count on the fact that it’s in full compliance with regulations.

Since Ally Invest is online-only, it’s also important to review Ally’s data protection policies. The good news is Ally Invest promises that they use “multiple levels of security” to keep your info safe. This includes 128-bit SSL encryption for any exchange of data from your browser and Ally’s servers if your personal information is being transmitted. The downside, however, is that Ally’s privacy policy does permit Ally Invest to share your information with third parties. While common, it’s important to keep in mind.

Of course, once you invest your money, there’s always a risk of losses. Investing means you can potentially lose money. Research what you’re investing in carefully, and diversify your portfolio to minimize the risks you’re taking.

Bottom line

Thanks to the fact it has no minimum deposit requirement for its self-directed brokerage accounts, Ally Invest is a great choice if you’re looking to get started investing and you don’t have a ton of money. Commission-free investments give you a diverse offering of low-cost or no-cost options.

But the high mutual fund transaction fees are a turnoff. Along with that, not being able to meet with an advisor face-to-face could deter you from signing up. Since Ally doesn’t have physical branches, you may feel like you’re missing out without the in-person interaction.

Overall, it’s a great option for beginning and intermediate investors. The offerings might not be as detailed for expert investors, but if you’re looking to get started or enhance your experience, Ally Invest might work for you.

Open an Ally Invest accountSecured
on Ally Invest’s secure website

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Christy Rakoczy
Christy Rakoczy |

Christy Rakoczy is a writer at MagnifyMoney. You can email Christy here