I have a 100% mechanical system that can predict a move at least of 1.2% in the DJIA with 78% accuracy (this currently equates to about a 100-pt move with Dow at 8322). All back-testing caveats were taken with regards to ensure no curve-fitting. Performance on multiple out-of-sample sets have similar results, all in 76-80% range. The samples-to-input-parameters ratio protects against curve-fitting. Random noise testing was done with input data, as well as monte carlo optimization to observe the 3D parameter surface map to ensure similar results across small changes in parameter input. In short, I am very confident in the robustness and statistical significance of the results. So my question is- how would you exploit this? On days that the model says "there is a 78% chance that the DJIA will move at least 1.2% today" what would you do? Note that you do not know which direction the move will be, only that the magnitude will be at least 1.2% (the average magnitude is about 1.5% (currently about 124 pts in Dow). 50/50 tendency for up vs down move. Would you purchase a Dow futures options straddle? What types of straddles? Would you look at correlated indexes like OEX instead? (1.2% approx results in 5.00-pt move in OEX.) What deltas will you target? Keep in mind there is a bid/ask spread to overcome as well. What combinations would you use, if any. Would you try to go long delta with both futures and options? Keep in mind we're talking a 1.2% move here (the problem would be much simplier if the move was, say 2% or more). Here's an example. With DJIA at 8322, you could purchase Nov DJ futures options: 8500 Call - 2000 8100 Put - 2200 If volatility remains constant, if the next trading day DJIA moves 1.2%, one option will likely gain 400 while the other option will lose 300. But will this 100 gain overcome the bid/ask, and also the 22% of the time the move is less than 1.2%. Also note that if the market does not move 1.2%, you lose a day's worth of theta and perhaps some gamma. All new positions would have to be entered at close of trading day and exited on close of following day. All thoughts welcome. Depending on how this thread turns out I may reveal more of my model. I would like to focus on options strategies to exploit this 78% occurrence rather than on the model itself (for now).