These two have been bothering me for a while - can HFT delta hedging capture bid/ask spread on cash and can it properly capture the higher frequency M/R that is known to occur. If the HF spread/MR can be caught, given the fair number of HFT players in options, it has to be at least partially priced in. That, in my opinion, would cause two things - a statistical overpricing of shorter dated options vs. longer dated ones and, on these short-dated options with high gamma to vega ratio, it would cause ATM to be richer vs the wings. I have yet, however, to prove to myself any of this and don't want to spend any meaningful time on it.
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Nah. I like to talk and theorize about it, but my delta hedging process is fairly simple though does include a couple features to address my questions above.
