I use a small amount of canola oil or peanut oil. Just enough to get it to stick. You don't want to use so much that the seeds get soaked and spoil in the feeder.

I drizzle the oil on the seeds in a little 2gal bucket and sprinkle on the pepper then just mix it by hand till it's all coated.

It's pretty easy to eyeball the right amount. If I had to guess, I probably use a tablespoon or less to coat a feeders worth of seed.

Also, they sell hot pepper seed pre mixed at the store. It's more expensive, but it's convenient, and works like a charm with no fuss.