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Binary Options Explained
Binary Options are options that only have two possible values upon expiration. Either the option will pay a predetermined value for being in the money, or will expire valueless in the same way traditional option contracts will. Predetermined payout values normally vary between 60%-85% but may be higher. Binary option times to expiration are typically much shorter than traditional options.
Binary option trading has recently become more popular amongst day traders. Binary options have also have received some bad press lately, mostly for brokerages opening accounts from clients who did not have any risk capital to trade with. Despite some unscrupulous brokerages making a bad name for them, binary options are a legal instrument, and can create extremely nice returns for successful traders.
Compared To Traditional Options
Binary options are not contracts traded over open secondary markets like traditional options. Binary options are a contract between you and the brokerage. The brokerage states a payout if the option expires in the money, at Tradorax usually 80% but the amount varies, and the option will expire worthless if it expires out of the money.
Usually the two options a trader has are to either buy a put or a call option, and the strike price is the exact price of the security at the time the trade is taken. Essentially a trader is simply betting on whether the security will be higher or lower than the current price at the time of expiration. It does not matter how far in the money a trade becomes, or if it is even only 1 cent in the money, the option payout price will be the same. Because of this it is obviously in a traders interest to take low volatility but highly probable trades.
Who Makes Money
A brokerage makes money over time because with a big enough sample size, they will win about 50% of the time and all traders combined will win about 50% of the time. Below is the payout tree to a trader with an 80% return for each winning trade, a typical payout.
Obviously for a binary options trading strategy to be effective for a trader, they must win on at least 56% of trades, given an 80% payout on winning trades. For this reason demo accounts are a necessity for new traders who need to work on developing a strategy. Choosing only the most probably trades are vital for binary option traders, since it does not matter how far in the money a trade becomes.
Short Time Frame
Binary option contracts have very short time to expiration most of the time. Some brokers offer time frames as low as 1 minute, and may offer as long as a couple weeks. Because the time to expiration is extremely short the vast majority of the time, binary options are very convenient for traders who do not have all day to watch trades. Trading can take place during a lunch hour, or whenever someone has a few minutes. The short time frame also makes it very enticing for traders to trade more often than they should, and traders must remember to maintain a disciplined approach.
Funding and Withdrawing
After the option expires a traders account is immediately credited with the payout amount or loss, and there are no restrictions on when a trader can withdraw money like traditional brokerage accounts. There are also no restrictions on funding accounts, and this means day traders must be cognizant of the amount of money they are putting at risk, as they must with any strategy.
To open your own binary options account, click below to use our preferred broker.
Comparison of option types (1) – HighLow options
There are many types of binary options: Touch options and No-touch options, Classic medium-term high-low options which are offered by all brokers, KIKO options and many others.
But which one of these options is the best deal?
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Why should you choose a broker based on the offered option types and expiration times? In today’s article, you’ll learn what high low options are and in the next episode, we will look at Touch and No-Touch options.
Classic high-low binary options
The concept of the classic options is surely notoriously known. Simply predict whether the price of the asset (currencies, a commodity or a stock) at a certain time rises or falls and a reward in the form of a profit of about 180% of the amount with which we traded is awaiting us. These options can be traded with the vast majority of brokers. Best brokers who allow trade in conventional high-low options include: IQ Option, Olymp Trade and Expert Option. What does such trade look like can be seen in the picture below.
This is how a CALL highlow option works
|Broker||Bonus||Min Deposit||Minimum Trade Amount||Payout||Demo||US Traders Allowed||Review||Open Account|
|FREE DEMO ACCOUNT||$ 10||$ 1||Up to 100 % !*||Review||Trade Now!|
|FREE DEMO ACCOUNT||$ 10||$ 1||82 % for Standard, 90 % for VIP accounts*||Review||Trade Now!|
|FREE DEMO AND LOW MIN DEPOSIT||$ 10||$ 1||Up to 90 %!*||Review||Trade Now!|
|*in case of correct prediction
RISK WARNING: YOUR CAPITAL MIGHT BE AT RISK
Spread binary options
The broker High Lows offers highlow options with a small modification and calls them spread binary options. Unfortunately, they only accept Australian Traders now
|Broker||Info||Bonus||Demo||US Traders Allowed||Open Account|
|Payout: Up to 100%*
Min Deposit: $ 50
|Only for Australia||Trade Now!
The strike price is moved (what is a strike price?) a little in our disadvantage. This means that the price has to do a bit more movement than the minimum to get to the earnings. The advantage is that the broker pays a higher income of 100%. Do you understand how a spread option and classic option differ from one another? For better understanding, check out the picture below and compare it with the picture above.
This is how Spread binary options work. Notice the higher earnings and offset strike price.
I think that with high low binary options there is not much to explain. It is really the simplest type of trading. In the next part of this miniseries, we look at touch and no touch options.
Advantages of classic options:
Disadvantages of classic options:
More about the author Step
I’ve wanted to build a business of some kind and earn money since I was in middle school. I wasn’t very successful though until my senior year in highschool, when I finally started to think about doing online business. Nowadays I profitably trade binary options full-time and thus gladly share my experiences with you. More posts by this author
Binary Options Affiliate Programs
The Complete Guide To
Binary Option Affiliate Marketing
So youвЂ™ve heard a few things about Binary Options. Some good, some not so good, and some just downright confusing. В You may not even be sure what these are let alone how to become an affiliate orВ start promoting this instrument.
Good news.В This article is going to solve all these questions for you and maybe a couple you didn’t know to ask. ItвЂ™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 youвЂ™ll even see some examples of the earning potential these programs offer.
What are Binary Options
Binary Options are a simple financial instrument which allows anyone to trade price fluctuations in markets throughout the world – without having to own anything.В
ItвЂ™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.
Types of Binary Options
As these Binary Option markets have grown, platforms/brokers have started to offer different types of Binary Options. В
The traditional method – outlined above, is whatвЂ™s known as a вЂHigh-Low Binary OptionвЂ™ and is the one we will focus on today.В
Others you might come across include: вЂOne-Touch Binary OptionsвЂ™ (where the price just has to touch a certain point during your specified time) and a вЂRange Binary OptionвЂ™ (which allows traders to select a high and low to determine a range the price will fluctuate between during the course of their OptionвЂ™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 вЂexecuted.вЂ™) 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. В You need to read the terms and conditions for each broker to find out their exact processes.
U.s. vs Rest of the World
WeвЂ™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. В
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.
В 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 trading example
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 вЂwinвЂ™ or вЂloseвЂ™ scenario for the option. В ItвЂ™s like you are gambling on the price change, however, because itвЂ™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 вЂAll-or-Nothing OptionsвЂ™ or вЂFixed-Price Options.вЂ™ This is because there are only two outcomes to your Binary Option contract – you win or you lose. В And both outcomes have pre-determined numbers.В
LetвЂ™s say youвЂ™ve been researching about Company X. YouвЂ™ve looked at their financials, read about their Board and seen some positive articles in the news lately. В You decide that you quite like this company and feel itвЂ™s going to increase in value. В One method for investing based on this research is to buy a Binary Option. В 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%. В 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. В
The share price will be above $12.54 as you thought, or it will be lower.В
If you were right and the price was higher at the specified time, you вЂwinвЂ™ (or your option has finished вЂin-the-moneyвЂ™) and you receive $165 back.В
В If you lose (finish вЂout-of-the-money) then you receive $0 back. В
No matter where the price ends up when the Option is executed, you cannot вЂwinвЂ™ more or less than $65 and you cannot вЂloseвЂ™ more or less than $100. Your risk and return is fixed from the outset.
ProвЂ™s and ConвЂ™s of trading Binary Options
The simple nature of Binary Options means itвЂ™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. В ItвЂ™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. В 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. В You cannot become liable for any further losses no matter how вЂwrongвЂ™ or how вЂout-of-the-moneyвЂ™ you were when the Binary Option was executed. On the flip side, your return or вЂwinвЂ™ is also set to the predetermined amount. This means when trading Binary Options itвЂ™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. В 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.
How do Binary Option affiliate programs work?
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. В
How To Register
This is the easy part. В 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. В
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.В
This is where it can get a little trickier and where some of you may prefer the programs with more customer service and support overВ higherВ commission.
How do you promote Binary Option trading to your audience
Now that youвЂ™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, itвЂ™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 вЂmake money online.вЂ™ Each of them have different вЂneedsвЂ™ 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. В
Gamblers are more likely to be after a thrill or a quick, simple way to get started. В 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.) В Make sure you donвЂ™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 вЂwanting to make money online.вЂ™ В These people donвЂ™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 вЂfinanciallyвЂ™ educated audience. В 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. HereвЂ™s a few ideas to get you started:
Why Promote Binary Option brokers?
The world of Binary Options trading is exciting. Once youвЂ™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 2020 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 2020 with Q2 2020, the volume and total number of trades is up nearly 40%. вЂThe growth in trading volume reflects continued mainstream enthusiasm for exchange-traded binary options and spreadsвЂ™.
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:
Types of commissions
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.
How much is possible to earn?
ItвЂ™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.
What to consider when choosing a Binary Options affiliate program?
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, itвЂ™s time to drill down and identify the right program(s) for you. В
You can visit our list of trusted affiliate brokers to compare them against your new-found knowledge. В
Remember that the key points to look out for are:В
If you go in open-minded and remember to research each broker using the points weвЂ™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.
Best Binary Options Brokers 2020: