I see HFT as good for everyone.

Market has a hard time reacting to option spreads when the long option is executed prematurely. I don't see why big players can't use them.

Also the market can't react too predictably. Because then the big player could just yank the market around and profit.

Some of this is limited by regulations on large holders / insiders.

It limits the ability of value investors who do fundamentals research to profit. Arguably those investors are the ones who actually ensure efficient allocation of capital (the supposed purpose of the market). There's kind of a paradox of efficient markets - the more efficient the market is, the less value can be gained selling information to it.

It does no such thing. Market makers prefer not to interact with people that have a directional view as they may move the market. If a market maker gets caught with inventory and the price is moving they will lose money. Market makers tend to be less involved in price formation then other types of investors.

> It does no such thing. Market makers prefer not to interact with people that have a directional view as they may move the market. If a market maker gets caught with inventory and the price is moving they will lose money.

Are you claiming this doesn't impact the profitability of those people with directional views?

It depends on what you mean by impact. A market makers role is to provide market participants the instantaneous ability to buy or sell a security. They compensated a small amount for providing this service. If someone is using very poor execution techniques the price could worsen, however most large asset managers and brokers that serve them have quite advanced execution technology. The actual impact of modern market making on final execution price is typically positive relative to not having it due to competition and ultimately a tighter spread.

See Vanguard on this: http://www.cnbc.com/2014/04/25/vanguard-chief-defends-high-f...

Vanguard invests almost purely passively, and does not generally take directional views. I agree HFT benefits Vanguard but that doesn't contradict my point at all.

Buy and hold is a directional view.

Let's not get into a semantic argument. The point is that Vanguard doesn't do fundamentals research or participate in capital allocation (in a meaningful sense; Vanguard does allocate capital but in proportion to existing allocation); they just invest passively and hope to earn the return of the overall market.

Its not semantics. You simply don't know much about the asset management business. Vanguard has numerous actively managed offerings. For example Windsor (http://performance.morningstar.com/fund/performance-return.a...). But there are others like the Admiral funds.

Any big enough company has small fingers in many pies. Vanguard's focus and specialty is their low-cost index (and similarly passive) funds.

A clarification on my other sister post: options allow one to lock in a price for cheap even at large volumes. For example expiring options can be bought for nickels in premium, with each one locking in price for 100 shares.

Expiring options are pretty thinly traded, no? If you're trying to sell 100000 shares, you may have a hard time scrounging up 1000 puts at 3:30 Friday.