There's a vintage Wall Street proverb that says only “dumb money” buys in the morning while “smart money” buys late in the trading day. However statistics show the opposite to be true.
According to Antoine Cureton (founder, SolidRatio Investments), the first half hour of the trading day is anything but “amateur hour.” In fact, it’s the best time to trade options.
Between 9:30 and 9:50 a.m. stocks trade at their most unpredictable levels of the day. Additionally, the first hour has proven to be the most dynamic in terms of price action. Stocks react to overnight news, geopolitical news, earnings results and stock market "talking heads", leading up to the open.
Then stocks open with FOMO traders making "bets" driven by the aforementioned data. This is impulse trading.
Another prospective reason for the strong early performance could be related to mutual fund flows as well as foreign inflows,” said SolidRatio founder Antoine Cureton. “In the 90s there were strong flows into mutual funds, and when managers got new funds they'd flood them into the market.”
After early "power hour" options trading, the next best time to trade on an intraday basis is between 3:30 and 4 p.m., according to SolidRatio.
The worst time to trade?
I'd say between 11:30 a.m. to 1 p.m., volatility of the market begins to decrease at around 11 a.m. Additionally, London Stock Exchange closes at 11:30 a.m., EST. During this time, the volume is also inclined to reduce. Therefore, when trading at this time, you do not maximize your returns and often price action can be extremely choppy.
And don’t you think about trading the open on a Monday; Mondays present the most indecision in the market. Therefor, you should wait for clear direction on all trades. You must have patience and allow the market to settle. Additionally, companies tend to release bad news on a Friday, after markets close, which then depresses stock prices on the following Monday.
If you're interested in selling call options or buying put options, then Friday may be the best day to take a short position (if stocks are moving higher on Friday), and Monday would be the best day to close the position. Fridays heading into a three-day weekend tends to be extremely profitable to those betting against the market.