So you’ve heard a few things about Binary Options. Some good, some not so good, and some just downright confusing. You may not even be sure what these are let alone how to become an affiliate or start promoting this instrument.
Good news. This article is going to solve all these questions for you and maybe a couple you didn't know to ask. It’s going to provide a definition with some easy to understand examples, you will see how and why you should be promoting binary option trading, how to sign up to an affiliate program and you’ll even see some examples of the earning potential these programs offer.
Binary Options are a simple financial instrument which allows anyone to trade price fluctuations in markets throughout the world - without having to own anything.
It’s easier to think of these options as a cross between the more technical financial market trading and simple gambling. You basically pick the market you are interested in, for example: NASDAQ share market or EUR/USD foreign exchange pair, decide whether you think the price will go up or down over a certain period of time and then purchase the corresponding Binary Option.
As these Binary Option markets have grown, platforms/brokers have started to offer different types of Binary Options.
The traditional method - outlined above, is what’s known as a ‘High-Low Binary Option’ and is the one we will focus on today.
Others you might come across include: ‘One-Touch Binary Options’ (where the price just has to touch a certain point during your specified time) and a ‘Range Binary Option’ (which allows traders to select a high and low to determine a range the price will fluctuate between during the course of their Option’s time frame.)
It will depend on the specific broker as to what types of Binary Options are offered so you will just need to do a little research to make sure the type you want is offered when considering a broker.
Typically, when you buy a Binary Option, you have to hold it until it finishes (or is ‘executed.’) Again, this can vary between brokers and some may allow you to exit the trade before the Option is executed but there will generally be a lower pay out or a fee associated with this action. You need to read the terms and conditions for each broker to find out their exact processes.
We’ll just take a second here to advise that the Binary Option market has some big differences between the US and the rest of the world.
The most important thing to note is that most foreign binary option brokers are not legally allowed to sell to residents of the U.S. unless they have been registered and regulated with the Securities Exchange Commission (SEC) or Commodities Futures Trading Commission (CFTC.)
This just means that if you are considering the idea of becoming an affiliate for a Binary Options brokerage, you need to identify where your target audience lives and thus what Binary Option brokers are appropriate for you to promote.
If you will be targeting people living in the U.S. you might want to check out some Binary Option platforms that are operating there.
A more thorough example of a traditional High-Low Binary Option trade including some technical terms is explained below:
Earlier I mentioned that you could think of the Binary Option as something between a straight up gamble and a fully blown financial market activity like buying shares or trading foreign exchange.
This is because Binary Options use the financial world markets as a base to calculate the ‘win’ or ‘lose’ scenario for the option. It’s like you are gambling on the price change, however, because it’s based on real world actions (and not just a dice roll or flip of a card) anyone trading Binary Options will feel more in control as they can make decisions based on research.
Binary Options are also known as ‘All-or-Nothing Options’ or ‘Fixed-Price Options.’ This is because there are only two outcomes to your Binary Option contract - you win or you lose. And both outcomes have pre-determined numbers.
Let’s say you’ve been researching about Company X. You’ve looked at their financials, read about their Board and seen some positive articles in the news lately. You decide that you quite like this company and feel it’s going to increase in value. One method for investing based on this research is to buy a Binary Option. You might purchase one stating that the share price of Company X will be above $12.54 at 3:15pm on a particular day.
You pay $100 for your Binary Option and it has a pre-agreed payout of 65%. That means that when the option is executed (or completed) - which will be at 3:15pm on the particular day you chose when purchasing it - you will either be right or wrong with your investment.
The share price will be above $12.54 as you thought, or it will be lower.
If you were right and the price was higher at the specified time, you ‘win’ (or your option has finished ‘in-the-money’) and you receive $165 back.
If you lose (finish ‘out-of-the-money) then you receive $0 back.
No matter where the price ends up when the Option is executed, you cannot ‘win’ more or less than $65 and you cannot ‘lose’ more or less than $100. Your risk and return is fixed from the outset.
The simple nature of Binary Options means it’s a great instrument to allow people to be involved in the financial world without needing to have complete understanding of how the sharemarket works or how to buy and sell foreign exchange. It’s also more interesting than simply gambling as the results are based on real world contracts and activities, giving investors more control in the outcomes.
There are no liquidity concerns, as you are not purchasing any underlying assets and platforms/brokers can create any number of different options which provides plenty of variance for traders to choose from. This also means that traders can buy Binary Options based on any asset class around the world - giving them exposure to any product desired.
The fixed price aspect of these options provides a safety net in a sense that you cannot lose more than the option cost. You cannot become liable for any further losses no matter how ‘wrong’ or how ‘out-of-the-money’ you were when the Binary Option was executed. On the flip side, your return or ‘win’ is also set to the predetermined amount. This means when trading Binary Options it’s easy to consider the risk-reward scenarios as you already know your exact two outcomes before any purchase is made.
The downside of these Binary Options are that unlike traditional options, the holder does not have any right to purchase or sell the underlying asset. This means in the example above, your investment is simply mirroring the changes in the share price of Company X - at no time do you own any shares or have the option of owning any shares from your Binary Option.
Trading in binary options is highly speculative, involves an outstanding risk of loss and is not suitable for everyone but only for those investors who: (a) understand and are willing to assume the economic, legal and other risks involved; (b) are financially able to assume the loss of their total investment; and (c) have the knowledge to understand binary options trading and the underlying assets.
Now that you know what Binary Options are and how they work, we need to learn how to sign up to act as an affiliate and how to promote Binary Option trading to your audience.
This is the easy part. All you need to do is browse through the available affiliate programs and compare them to find the best one for you - services differ in terms of commission rates, customer service and support in creating adverts and content.
Once you know who you want to sign up for (and it may be more than one depending on your personal situation) you can simply click on their sign-up link, fill in your details to create an account and begin advertising your affiliate link to your audience.
This is where it can get a little trickier and where some of you may prefer the programs with more customer service and support over higher commission.
Now that you’ve signed up to an affiliate program and have your very own affiliate link you need to consider how to promote this to your audience to get the best results.
You might have a website with a certain number of visitors each month, a dedicated email list or maybe even a growing Facebook page or twitter account. There are many forms that your lists can take these days but no matter what platform you use, it’s important to tailor your adverts to your specific audience.
Generally there are three types of traffic interested in Binary Options trading; Traders, Gamblers and those who want to ‘make money online.’ Each of them have different ‘needs’ in terms of what they are looking for online and what type of advert or content will convert them into a user and earn you that commission.
Gamblers are more likely to be after a thrill or a quick, simple way to get started. They may be attracted by the flashing banners or an interesting sign up bonus (as an affiliate member, your program partner may offer you some exclusive sign up bonuses you can promote.) Make sure you don’t bore them with in-depth technical terms or even too much detail on what Binary Options are.
The other group not too interested in technical terms are those who fall into the category of ‘wanting to make money online.’ These people don’t want a lot of jargon or big financial phrases in the explanations but they will require more nurturing than the gamblers. Adverts targeting this group need to throughly explain the process and the risk/reward presented by Binary Options trading in layman terms and probably walk them through various examples.
Traders are the final group likely to be interested in Binary Options and are probably the most ‘financially’ educated audience. You can make use of more technical terms in explanations and adverts containing more information, in-depth reviews or comparisons are likely to be more effective in achieving a conversion.
Now that we know there are different platforms your audience is connected on AND that your audience might fall into different categories of traffic based on their needs, we need to think about the most effective way of delivering your affiliate link to them. Here’s a few ideas to get you started:
The world of Binary Options trading is exciting. Once you’ve explained to someone how it works, and they realize the simplicity and speed with which they can get started and begin earning profits, conversions can be a lot easier than through other affiliate products.
The Binary Options market has experienced incredible growth since 2008 when the US Securities and Exchange Commission (SEC) ruled that Binary Options no longer had to be traded on an exchange and the advent of online trading kicked-off.
Since then, growth has been exponential and experienced a serious increase of interest after 2012 when some jurisdictions reclassified Binary Options trading from a gambling product into a financial instrument.
Even if we just look at the Nadex, which is a regulated US exchange for Binary Options, we can see that in the last year, when comparing the second quarter (Q2) of 2016 with Q2 2015, the volume and total number of trades is up nearly 40%. ‘The growth in trading volume reflects continued mainstream enthusiasm for exchange-traded binary options and spreads’.
As the Binary Options trading market matures and becomes more regulated, growth will continue. If you can establish yourself as a respected source of information, comparisons, reviews or discussion to your network now, then there is great future potential for your business.
There are numerous benefits of becoming an affiliate and promoting Binary Options trading to your audience. These are some of the reasons why you will achieve great responses to your promotions and high conversions:
There are multiple different ways for you to earn a revenue as an affiliate of these brokerage firms. You will need to decide what type of revenue suits your needs best and then compare what methods are offered by each broker.
It’s very hard to estimate how much you could earn because of all the varying factors - how big your audience is, how successful your promotions are, which affiliate program you join and what commission structure you choose.
For arguments sake, lets say you have 10,000 site visitors per month and convert 0.1% of them into a customer for your chosen affiliate program which pays you $300 CPA. This means that every month, you are converting 10 people into traders for your brokerage firm and are receiving commissions of 10*$300 = $3,000.
It gets harder to predict potential income under revenue share or hybrid commission structures but have a play around with this equation based on your own audience size, conversion rate and commission details. You might be quite surprised.
Congratulations on making it this far. Now that you have a solid understanding of what Binary Options actually are and how the various affiliate programs work, it’s time to drill down and identify the right program(s) for you.
You can visit our list of trusted affiliate brokers to compare them against your new-found knowledge.
Remember that the key points to look out for are:
If you go in open-minded and remember to research each broker using the points we’ve covered here, you should come out feeling very confident as an affiliate partner for a trusted Binary Options brokerage, and ready to start converting your hard-earned audience into real dollar returns.