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Is It Possible To Make Money Trading Binary Options?
Trading binary options online has become possible in 2008. It was a new way to make fast profits online for financial speculators. Trading binary option is open and available to anybody over 18 (one should check local government regulation before trading BO).
Binary options allows the user to speculate and place trades, which are essentially bets, on the direction of financial assets from a basket of currencies, stocks, commodities and indices. In binary options your losses can never exceed your deposits and your return is clearly defined at entry.
It is no secret that trading on the world’s financial markets by buying and selling positions has made many millionaires. It is also a fact that the markets bankrupted many more. The line between winning and losing can be very subtle. While trading may not be for everyone, the unprecedented ease of access to financial trading online has certainly made a lot of people happy about new possibilities.
Is it really possible to make money? If so, how much?
The big question is can you really make money trading binary options? Short answer is yes, but it’s not that simple. Whether you make money or lose money really depends on a number of factors including your risk management, trading strategy, the options that you choose when you enter the trades, your broker fees, your trading psychology, etc. There are simply too many factors to consider but of course it is possible to win and make money, but it’s not as easy as binary options advertising has us believe.
Brokers will often entice people with all types of bonuses and ads that suggest making money trading binary options is very easy. Although the actual act of trading binary options is easier than Forex it is not easier to win and make money consistently in binary options.
Here is a mathematical formula to calculate break even ratio in binary options:
- B – Break even ratio – (shows how many times you need to win to break even)
- I – In the money ratio – (shows broker payout for winning trades)
- Ot – Out of the money ratio – (shows your losses for losing trades)
Using the above formula you can calculate the break even ratio assuming a set of fixed parameters. Assume your broker pays you 90% for wins and takes 100% for losses.
B = 100% / 90% (in the money) + 100% (out of money)
B = 100 / 190
B = 0.5263
What this means is that in the case of a payout rate of 90% and 0% rebates on losses you will have to accurately predict 52.63% of your investments in order not to break even. This break even calculation can change quite significantly with different options. A 90% payout is very generous and rarely seen in binary options.
Let’s look at the numbers and for the purpose of further illustration let’s assume that we are dealing with a trader who has a trading strategy with 75% of wins. (There are numerous signal providers that achieve those levels.) 75% of wins is quite high for most standards. He also uses a binary options broker who offers only 70% of profit on each winning trade.
In one month he takes 52 trades and on each trade he puts $100. His total investment will be $5200. It averages out to about 2 trades per trading day. Let’s also assume that each trade has a payout of 70% and a return of 0%, as is the case with many binary brokers.
When we divide the total sum of his investment of $5200 between the 75% of winning and 25% of losing trades we split the working capital between $3900 which was spent on the winning trades and $1300 spent on the losing trades. Now let’s take the $3900, the 75% of his total trading capital, and add 70% of return payout on the winning trades which will produce $2730 of profit. His losing trades, the 25% of total trading capital, cost him $1300.
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*The end result is wrong, it is $6630 which makes it 27.5% increase
So now that we know how much profit was made, let’s take those numbers and put them into the mentioned breakeven ratio formula to see how many times he actually needed to win in order not to lose any money at all.
This financial calculation is quite modest because it assumes a return of only 70% on wins where many brokers offer payouts over 80% and some brokers also offer returns on losses, only about 5-10%, but this will change the numbers significantly.
In addition, there are a few binary options signal providers who consistently achieve higher percentage of wins than 75%, which would also drastically improve profits as well.
So, only for the purpose of further illustration of what would happen if the overall wins were 80% and the return payout also 80% we’ll continue with our calculation. In this case $4160 is our winning capital, namely the 80%, and the remaining $1040, the 20%, is the losing capital. The winning capital of $4160 generates $3328 of profit (80% of payout for wining trades) and the losing capital of $1040 is simply lost, we’ll also use 0 return for losses in this calculation. So, out of 52 trades for $100 each the profit is $3328 and loss of $1040. Remember, that’s only in one month of trading.
As you can see the difference in earnings is huge between the first and the second example. A 24 percent per month as opposed to 2.5 percent per month is a world of difference. This is why it is so important to understand your risk exposure in binary options. Let’s see how many times he needed to win to break even:
Professional traders understand that and seek options and ways to keep the odds in their favor. For example trading with brokers that offer 85%-95% on wins and some return on losses. In addition there are ways to trade binary options to receive even higher payouts, as high as 200%.
Of course were profits can be made in a such a quick way there is inevitably going to be more risks involved. You can make money trading binary options online, there is no doubt about that, but you can also lose money. Following a reliable binary options signals or strategy or a professional trader in live sessions can really help you succeed in trading binary options online. It could be the difference between winning and losing.
Yandex and binary options “in law”: Russian authorities refused to equate them with Forex
Binary options are not Forex, so they can be freely advertised. How did Yandex end up in this story, and how did officials come to this conclusion?
The long judicial history between FAS on the one hand and Yandex LLC, Process-A LLC (advertiser) and Smartex International (Olymp Trade brand owner) on the other, has finally ended. The UFAS Commission examined the application of the SRO Association of Forex Dealers (AFD) and opened a case on violation of the Law on Forex in the fall of 2020.
Yandex escaped punishment for advertising binary options
The defendants were Yandex advertising platform and Olymp Trade advertiser. According to Russian law, it is forbidden to advertise Forex services if the company does not have a corresponding license from the Bank of Russia.
According to the FAS, the text of the advertisement does not contain the words “forex”, but there are the words “option” and “binary option”. The provision of binary options trading services is not regulated by the legislation of the Russian Federation.
FAS is not against advertising binary options Olymp Trade
There is no evidence that trade binary options identical with the activities of forex dealers. Moreover, by clicking on the link of an advertising banner, the user gets to the company’s website, which does not make it clear whether the advertising of services is an advertisement of a Forex dealer.
The results are as follows. Trading and access to binary options trading does not fall under the laws of the Russian Federation, therefore, is not regulated by anything. If the advertisement or the site to which this advertisement leads do not directly indicate the activities of the Forex dealer, then by law there is nothing to be done about it.
At the same time, if the activities of a forex dealer that does not have a license from the Bank of Russia are advertised, then even that services will formally be provided by the company from outside Russia will not save such advertising.
In general, do not fall for the tricks of scammers, use the services of licensed Forex dealers and understand the full degree of risk of investment in the Forex market.
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:
- Banners – this is probably the most common method of promoting your affiliate link and simply means placing a banner on your website or within an email. В This will just look like another advert except your payoff is potentially a lot higher. This is also the easiest as most affiliate programs will already have a supply of pre-built banners you can simply add to your webpage. Likely to be more effective with the gambling traffic type.
- Discussion – if your audience is built around reviewing financial products, or ways to make money online then it could be as easy as doing a write up about Binary Option trading. You can even use the information in this article to help explain it if you need. With this method youвЂ™re simply telling your audience about Binary Option trading and then recommending your chosen partner and sending your audience to their page through your affiliate link which is inserted into your article. В If youвЂ™ve used simple terms in your explanation then this might be the best method to target those who вЂwant to make money online.вЂ™
- Reviews/Comparisons – this is a slightly more in-depth method and may involve building a new website or adding pages to an existing one. В If youвЂ™re targeting an email list, Facebook page or twitter account then perhaps it will be in the form of a blog post series. This strategy really starts to pay off if youвЂ™ve joined multiple affiliate programs. As you review and compare each program, just insert your your affiliate link at the bottom of each write-up and then no matter who your readers choose to go with, you should be rewarded with a commission. В The other benefit of this strategy is that you are providing education about this relatively new concept and beginning to set yourself up as an expert in the Binary Options trading arena – meaning more traffic and more commissions.
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:
- Simple processes – from opening an account to doing your first trade, operating in the Binary Options market is very simple. Accounts can be set up in minutes online and the individual brokers you are promoting generally have great customer support which assists with conversion of your audience.
- Education material – most brokers offer free education materials and demo accounts. В This is a great lead in for your audience, especially if they are unsure and want to learn more about the market. В Whilst itвЂ™s very simple to understand and get started, there is also a lot of education available to enhance their chances of becoming a successful trader.
- Scale of Complexity – this market appeals to a wide range of groups because traders can be as involved as they want. В If they are more of a вЂgamblingвЂ™ type then they can get started immediately and place their trades. However, for those that like to feel more in control and make вЂcalculated decisionsвЂ™ there is a lot of education they can undertake in order to learn principles about the financial markets or a specific commodity they intend to trade on. This in turn builds confidence and excites them about the prospect of trading through Binary Options.
- Competition – as the market grows it becomes more competitive and brokers offer all sorts of promotions to attract new clients. The more offers there are, the more likely your reader will sign up to trade with one of your affiliate brokers.
- Trading System – low trade size (low minimum deposits and trade values), high returns (up to 90%), limited risk (your potential loss is known and set at the beginning of a trade), and short term trade periods (from 60 seconds) all work to create a trading product that is very appealing to a wide range of different people.
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.
- CPA (Cost per Acquisition) – you will be paid a certain amount for every new client that signs up with the brokerage firm after using your link. The revenue really does vary between firms but you may commonly see $200 – $400 per acquisition. One important thing to find out is how your reader will be tracked (how the вЂcookieвЂ™ is treated) – which means if someone uses your link but ends up signing up a few weeks later do you still get paid? В Some firms offer вЂforever cookiesвЂ™ meaning that at any time in the future if that person signs up you receive your commission. В
- CPL (Cost per Lead) – similar to CPA, cost per lead pays a set amount per lead provided to the firm. This typically generates a smaller fee of around $10-$40 per lead, however not many programs offer this type of commission structure.
- Revenue Share – this deal rewards you for every trade the investor makes with that brokerage in the future. В The rate is usually around 35%-40% and is either based on new deposits or net revenue generated by the investor.
- Hybrid – this is a mix of the CPA or CPL and Revenue Share options. В Generally you will receive a smaller lump sum payment for each acquisition and a lower percentage return for the revenue share. В This may be something like $150 per CPA and 20% revenue share.
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
- Location – whether the program is legally allowed to offer services to clients in the US if thatвЂ™s where your audience is.В
- Reviews – read as much about each broker as possible to make sure you have an understanding of how they work and what their track record is.В
- Support and Customer Service – how easy is it to work with each firm and what level of service do they provide to the clients you send their way.В
- And finally, commission – what payment structures are offered and what are the rates. How does this compare to what you need?
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 Broker!
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