Option analysis

Yesterday I conducted an analysis of option volatility and bid ask spreads as the day comes to a close. This is around 4pm EST. Also, this is not the expiry of options but just as the day closes. This was done to ascertain the right time to close out option positions based on optimal vol levels and bid ask spreads.

I took 3 short dated options around ATM. Thus when S&P was at 138, I took options expiring in 3 days with strikes of 135, 137 and 139. I also took the next dated options expiring in 23 days with the same strike prices. These are also the current options spreads that I am in. Below is how the vol behaves in the last 20 minutes - 1 mins increment for the first 15 minutes and then 30 second increments.

139L is the long dated option which I am long. 139S is the short dated option which I am short. Note that the longer dated option vol does not move much during the last 20 minutes, which the short dated option vol is quite "volatile". Also short date option vol decreases in the last 30 seconds, which suggests a good time to cover. However, that may also increase the risk of not completing the transaction. Overall, no useful indications of ideal trade time. Which means I can close out of positions anywhere in the last 20 minutes as far as vol is concerned. Also shown are the bid ask spreads of the same options

Note that the bid ask spreads of the short dated options are much larger that the long dated options. They widen at close which is expected. There is a time around 5 minutes before close that the spreads contract. This may just be an anomaly but indicates a good window for closing out positions. This needs to be investigated further. Apart from above observations, nothing major comes to attention.