We have maintained a short target of above 20 for the VIX and were able to action this last week. The trade has quickly moved into a profit as the emerging market fears eased and volatility fell.
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As the equity market is likely to rally back to its pre-fear levels, volatility will be likely to fall further over the next few weeks, thus increasing the value of our XIV position. However, if the VIX were to rise again we would be happy to increase our position as volatility returns to a normal level over the long run by its nature. Accordingly we are in no hurry to exit the position, but will simply look to take profits once we feel the market has normalised and the risk reward dynamics are in no longer in our favour.