I believe option 2 is the best bet, cause it shows more regard to human lives by only demonstrating the power of the bomb, and letting Japan decide if they want to carry on fighting and face massive destruction and loss of civilians, or back down. Evidence points in the direction of Japan surrendering anyway, but there's no way to be sure. So, this option is the best of both worlds, if they were gonna back down anyway, no one dies, if they were planning on carrying on it gives them good reason not to, and if they decide to fight even after the demonstration of the bomb, then that's their problem.