Synthetic indices and Volatility 75

Volatility 75 is a synthetic index. It looks like a market on a chart, but it is a very different kind of product.

What it is

Deriv creates and offers its synthetic indices. It describes them as being generated by a random number process and built to behave with a set level of volatility: around 75% for Volatility 75.

What that means in practice

• No news: interest rates and earnings do not affect it, because it has no real-world link.
• 24/7: it trades all day and all night, including weekends.
• One provider: you cannot compare its price anywhere else, and you are dealing with the company that generates it.

Patterns in random data

People are very good at seeing patterns, including in random data. Be sceptical when someone sells a strategy or a signal for synthetic indices, particularly if it is based on a few weeks of results. A run of wins can happen by chance.

Check the regulation

Rules for synthetic indices differ by country, and they may not be available where you live. Find out which Deriv company you would be dealing with, and check its licence with that regulator.

Key point

Understand what you are trading. Volatility 75 is not a market with a story behind it, so treat any confident explanation of why it moved with suspicion.