Marathon Petroleum (MPC) Call Options May Be Substantially Undervalued to Your Advantage

Retail Traders May Have an Edge in MPC Options

Generally, when entering the options market, it's wise to assume the odds are stacked against you. The world of derivatives is often dominated by seasoned professionals who have access to superior information. By the time a promising tip reaches the average investor, the best opportunities may already be gone.

However, there are exceptions. Marathon Petroleum (MPC) might be one of those rare cases where individual investors could actually hold an advantage over institutional players.

Analyzing the Recent MPC Stock Movement

At first, the story behind MPC shares may not seem unique. The recent capture and extradition of Venezuela’s Nicolas Maduro has sent shockwaves through the oil sector. For Marathon Petroleum, this could mean a more crowded field for heavy oil supply, intensifying competition for raw materials. Over the last five trading days, MPC shares have climbed close to 2%.

What’s particularly interesting is the notable activity in MPC’s options market, which suggests a measured optimism. Many large trades have focused on call options close to the current price—specifically, strikes between $180 and $185 with near-term expirations. This pattern indicates a preference for bold, short-term bets rather than conservative hedging.

The timing of these trades is key. Since these call options are near the current share price, they would typically command high premiums. But because they expire soon, they can be purchased at a lower cost, signaling confidence in a short-term move.

Using the Black-Scholes-based Expected Move calculator, projections for MPC stock by February 20, 2026, range from $162.38 to $189.96. This helps explain why sophisticated traders are targeting the $180–$185 range.

In summary, these trades are assertive, but not overly so. Yet, there’s a chance that institutional investors are underestimating the potential upside.

Are Traditional Risk Models Missing Something?

Standard options pricing models like Black-Scholes shape how risk is assessed, but they may not always capture the true nature of a stock’s risk profile. This gap could present an opportunity for retail traders to find an edge.

Wall Street typically relies on models that assume risk increases steadily as the strike price moves further from the current price. To use a basketball analogy: making a layup is easier than sinking a three-pointer, simply because of the distance. However, in real game situations, a layup might be heavily guarded, making a shot from beyond the arc a smarter choice despite the distance.

For MPC, the probability of the stock reaching $190 by the February 20 expiration is estimated at just 26%. However, alternative data suggests this outlook may be too conservative.

Looking at historical 10-week returns, MPC typically ends up between $174 and $186 (with a recent closing price of $176.17). Over many periods, the stock tends to settle between $179 and $182.20. So, it’s not surprising that traditional models see a move to $190 as unlikely.

Yet, in the last 10 weeks, MPC has only posted gains in four weeks, resulting in a downward trend. In similar scenarios, the stock often rebounds, with outcomes ranging from $165 to $210 and the highest probability density between $180 and $195. Notably, the likelihood of landing anywhere in this range remains fairly consistent throughout the period.

While this may seem unconventional, under these conditions, the chances of MPC finishing between $180 and $195 over the next 10 weeks are roughly the same. Given the current geopolitical climate, traders may be justified in aiming higher than usual.

Crafting a Bold Options Strategy

Because Wall Street’s models treat distant strike prices as riskier, options further from MPC’s current price of $176.17 are seen as long shots. But distance alone doesn’t always mean lower odds of success.

Market makers must stick to standard pricing methods, but this opens the door for individual investors to take advantage of possible inefficiencies. One compelling approach is the 190/195 bull call spread expiring February 20. If MPC climbs above $195 by expiration, the trade could yield a return of 233.33%.

This strategy stands out for two reasons. First, the breakeven point is $191.50, which lends credibility to the trade’s potential. Second, the probability of further gains drops sharply beyond $195, so setting the upper strike here helps limit opportunity costs.