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Hi all, Thanks for commenting, this discussion has been helpful and I appreciate everyone's feedback. RE: the comment about Binomial Validation. I understand what you're getting at and it would make sense to do that for the purposes you list. However I think in this case its not useful...

Nitro, thanks. I use a similar method and model in trading FOREX and have had good results. I wanted to see if I can do the same in HV and apply it to options.

Do you mean Butterfly trades or something else?

IV, there in lies my quandry. My accuracy has been from taking samples from my data and overlaying the model on top of it. From those samples, the directional predictions of HV week (Up or Down) have been forecasted one week forward and has been correct 60-70% of the time. In my...

Yes I'm using 5 day realized HV and then predicting one week (5 days) ahead. The model is re-optimized on a weekly basis because volatility, is well, volatile. :) Ah so in your example then, I could sell a straddle and then delta hedge the underlying.

Hi All, I'm a relatively newbie to the world of options but I have a strong mathematical background. I've built a pattern recognition neural net model to help me predict the direction of next week's HV in the QQQQ's an SPX. Its accuracy is between 60-70%. How do I translate this into a...