The brief: Valero earns the most per barrel of the large refiners ($39.24 in the third quarter against $13.14 a year earlier), returns half of its cash flow, carries almost no net debt, and reported the best quarter in its history on 22 October; the stock has fallen 13% since, 9% of it in one session, as the diesel crack came off its record. Its options are priced at their one-year high with no report in the way until late January. The author is content to own it. This page works through what the cycle is made of and what the curve says about 2027, what the filings say Valero earns and returns through a cycle, what the market pays for it now versus 2022, and which put sits under the levels that matter.
Our view in one paragraph. The quarter was the top of the margin, not necessarily of the stock, and the market has priced the difference in two weeks. Three facts carry the page. First, 2026 is a product shock: the Iran war closed Hormuz in late February, crude flows recovered by September but Gulf product exports were still a fifth to a half of pre-war, Russian runs were at a twenty-year low under drones and an export ban, and a million barrels a day of US and European capacity had closed; the Gulf Coast 3-2-1 printed a record $81.86 on 25 September against a norm near $20, and Valero, which runs three million barrels a day of the most complex, cheapest-crude capacity in the world, captured $39.24 a barrel and $23.90 a share in the third quarter. The 3-2-1 has since fallen to $41–54 on a G7 stock release, a Russian diesel deal, Chinese exports and crude above $100; the gasoline crack is back in the teens and what is left of the cycle is diesel. Second, the filings show what Valero does with a cycle: it has retired 41% of its shares since 2015, bought back $3.4 billion of stock in the third quarter alone (9 million shares at about $375) and $7.3 billion over twelve months, added a new $10 billion authorization on 27 October to the $3 billion left, pays a dividend management calls 'a one-way ratchet' ($4.80 a year, raised every year including 2020), and sits on $9.8 billion of cash against a $4–5 billion target with 4% net debt to capital; on Friday it put $320 million of that cash into LyondellBasell's idled Houston refinery (165,000 barrels a day, restart targeted for the end of 2027), the cheapest capacity anyone has bought this cycle. An owner at any price is paid 7–8% a year in cash and the excess cash is a buyback in waiting. Third, the valuation is the cheapest in the group but not cheap against the cycle: 9.1× trailing earnings and 5.5× EBITDA with the record quarter inside the numbers, 6.7× the Street's 2026 EPS of $59.6 and 7.5× its 2027 $53.6, a 13% free-cash-flow yield; the same Street has 2028 EPS at $37.7 (10.6×), which is its own way of saying the cycle ends. In 2022 $29 of earnings traded at 4.4× and a 20% free-cash-flow yield because the market expected them to halve, and they did. Today the market pays twice that multiple for twice the earnings, which is a plateau priced, not a peak; the forward curve agrees ($88 diesel crack for December, $63 for December 2027, still three times normal), Jefferies does not (Hold since September: the stock 'prices 2030 mid-cycle at 2025 margins'), and the 2023 path does not either (EPS $15–20, the stock at 20× or at $250). Our view: sell the December put under the September consolidation, the 18 Dec $350 put at about $10.60 (break-even $339, 15% below the price, above the August base at $335 with the $320 put wall under it, 24% annualised), sized as a stock purchase; Valero is the refiner to own if the plateau holds, because it earns the most per barrel and converts it fastest, and $339 is 6.3× forward earnings with an 8% cash return for the wait. Marathon reports on Tuesday and will move Valero with it; a seller who wants the read-through waits until Wednesday and sells the $350 or, after a gap down, the $340 January.
The supply side is documented and unusual. The crude market healed in six months (Hormuz crude flows back to 13.5 million barrels a day by 30 September) but the product market did not: Gulf product exports were 677,000 barrels a day against 3.6 million before the war, because damaged hydrocrackers and hydrotreaters repair slowly and Gulf refiners kept product at home; Russian runs were 3.8 million barrels a day in June, the lowest in twenty years, with a diesel export ban from July to September; LyondellBasell Houston, Phillips 66 Los Angeles and Valero's own Benicia closed; China stopped new export contracts in March. Combined Middle East and Russian diesel exports in August were 75% below a year earlier. US refiners ran above 95% from May to September, the highest since 1998, on WTI $8 cheaper than Brent, while simple European plants went to negative margins and Far East plants to $2–3 a barrel: Valero's COO on the call. Distillate stocks are 10% below the five-year average, 32% below on the East Coast, and the IEA has middle distillates 'tight well into 2027'. Valero itself sees no demand destruction: its own network sold 4% more gasoline and 2% more diesel than a year ago.
The normalization is also documented, and it started five weeks ago. From the 25 September record the 3-2-1 fell to $41 on 27 October (back to $53 by the 30th) on the G7's 100 million barrel release, the Trump–Putin diesel deal (300,000 tonnes now, up to 3 million later, under a Treasury licence to April 2027; experts call it too small), Chinese diesel exports tripling in September and Dated Brent up 13% in a month, the crude-cost compression the COO warned about ('if crude oil prices increase significantly, it could cause some compression of refinery cracks'). The gasoline crack is already in the teens with demand −0.7% to −2.5%; what is left is diesel. The forward curve prices a slow decay, not a collapse: the diesel crack against Brent is $88 for December, $83 for March, $72 for June and $63 for December 2027, three times the pre-war norm; Goldman's 2027 US diesel margin is $63; Phillips 66 expects the strength 'through most of next year', HF Sinclair no full recovery 'until 2028'; 1.5 million barrels a day of deferred turnarounds land in 2027, which supports margins and raises Valero's own maintenance bill. Against that, the IEA has 2027 runs recovering by 2.8 million barrels a day and demand by 2.0, and the 2022 template halved cracks within six months. Valero's realized $39.24 was about 60% of the quarter's 3-2-1, pulled down by the gasoline leg, RVO costs and backwardation; the same capture on the 2027 curve gives $25–28 a barrel, roughly double 2025.
Verdict: the cycle will not repeat September; the fight is over the slope. The curve and the Street price a plateau (realized $25–28 in 2027, EPS near $50), the 2023 path a slide (EPS $15–20), and the three top-of-cycle markers are measurable: Gulf product exports recovering toward 3 million barrels a day, the US distillate deficit shrinking toward 5%, and the December-2027 diesel crack breaking $50.
Third quarter: refining margin $39.24 a barrel (Gulf Coast $37.55, Mid-Continent $39.27, North Atlantic $45.58, West Coast $38.81) against Phillips 66's $38.00 and PBF's $34.56, on 2,972 kbpd of throughput at 98% utilization and $5.03 a barrel of operating cost; net income $6.8 billion, refining operating income $8.8 billion against $1.6 billion a year earlier, renewable diesel $353 million against a $28 million loss (the 45Z credit and a 70% higher biomass-based-diesel mandate behind it), ethanol a record $272 million, $6.9 billion of operating cash flow against $432 million of capital spending. The payout was 52% of adjusted operating cash flow against a 40–50% framework (55% for the nine months): $3.4 billion of buybacks (9 million shares at about $375) and $345 million of dividends in the quarter; $7.3 billion and $1.4 billion over twelve months, 7.8% of the market value; a new $10 billion authorization on 27 October; the diluted share count from 464 million in 2016 to 279 million, and the dividend from $1.90 in 2015 to $4.80 now with no cut through 2020.
The qualifications are West Coast and gasoline. Benicia (145 kbpd) has been idle since April with 'no plans to restart it' ('a tough environment to operate in the West Coast'), so the West Coast is Wilmington alone at 100–110 kbpd of guided fourth-quarter throughput, earning $38.81 on a small base; California's import premium benefits Marathon's Los Angeles plant more than Valero. The Gulf Coast system is long gasoline in a diesel cycle: the roughly 60% capture of the 3-2-1 is the cost of that mix. And Friday's purchase of LyondellBasell's idled 165 kbpd Houston refinery for $320 million (restart targeted for the end of 2027) is cheap capacity, but it is capacity added into a cycle the Street expects to be over by then: management is betting on the plateau with the balance sheet, which is the right way round.
Verdict: the operating record is the best in the group and the cash goes to shareholders; the system's gasoline weight is why Valero's per-barrel number did not rise as fast as the diesel crack and why it will not fall as far.
At 30 September Valero held $9.84 billion of cash against $8.6 billion of debt and $2.4 billion of finance leases, net debt to capital 4%, ratings Baa2/BBB stable, with management's own cash target at $4–5 billion: about $5 billion of the balance sheet is a buyback in waiting, and the new $10 billion authorization says so. The test case is in the table below: in 2020 Valero lost $1.4 billion ($3.50 a share), paid $1.6 billion of dividends anyway, and the stock bottomed near book value.
Two things to watch rather than worry about: the 2027 turnaround season will be heavier than 2026's (the company deferred maintenance into the high-margin months, as the whole industry did), and the renewable diesel segment's earnings depend on RIN, LCFS and 45Z prices that moved sharply on the EPA's small-refinery decisions this autumn.
Verdict: a would-be owner is not taking balance-sheet or dilution risk; the risk is the earnings line and the multiple on it, and the cash cushion is large enough to keep the buyback running through a 2023-style year.
It is the cheapest of the large refiners on every trailing measure, and the only one whose record quarter is already inside the trailing numbers: 9.1× trailing earnings and 5.5× EBITDA, a 13% free-cash-flow yield, 6.7× the Street's 2026 EPS ($59.6, up from $35.4 ninety days ago) and 7.5× its 2027 ($53.6), against an S&P 500 at 22; Marathon is 6.3× forward and 9.1× EBITDA, Phillips 66 10.3× and 6.2×, HF Sinclair 10.8× and 3.5×. Twenty-one brokers split 2 strong buy, 9 buy, 8 hold, 2 sell with mean targets between $380 and $435 (range $238–530); October brought raises from Citi ($485, Neutral), Wells Fargo ($489), UBS ($467), Barclays ($443), Mizuho ($434), BofA ($414) and TD Cowen ($400), a cut from Jefferies ($394, Hold) and a Sell from Freedom Broker ($358: 'the market is pricing peak margins as persistent').
Against its own history it is not cheap: year-end EV/EBITDA was 6.0× in 2019, 3.2× in 2022 (the last peak), 3.5× in 2023, 7.1× and 7.7× in 2024–25 when earnings were troughing and the market was paying for the recovery (ten-year median 7.4×); price-to-book is 4.0× against 1.4–1.9× in 2021–25. The 2022 comparison is the useful one: $29 of earnings at $127 then, $44 of trailing earnings at $400 now; earnings up 50%, price up 215%. The market has re-rated the cycle, and the Street's own path (2026 $59.6, 2027 $53.6, 2028 $37.7) says it ends in 2028: at $400 the stock is 10.6× that year. If 2027 earnings land near $50 (the curve), $400 is 8×, fair; at $30 (a 2023-style decline) it is 13×, full; at $18 (2024's level) it is 22×, and the stock would be $250.
Verdict: cheap on this year's earnings, fair on the curve, expensive on mean reversion; the strike should be chosen for the second description and survive the third for a quarter, which is what $350 with a $339 break-even does.
What confirms it: a close back above the 20-day ($426) and the 22 October gap; a Marathon fourth-quarter margin guided above $30 a barrel on Tuesday; weekly distillate stocks staying 10% or more below the five-year average.
What confirms it: a close below Thursday's $377.45 low and the $365 support after the Marathon print; a Marathon fourth-quarter margin guided under $25 a barrel; distillate stocks back within 5% of the five-year average.
| Date | Event | Why it matters for the thesis |
|---|---|---|
| Sun 1 Nov | OPEC+ meeting | Crude supply; refiners want cheaper crude with firm products. |
| Tue 3 Nov (pre-market) | Marathon Petroleum Q3 and the US midterm election | The sector's read-through: Marathon's margin (consensus near $45), capture and fourth-quarter commentary move Valero with them; the diesel-price politics ease after the vote. |
| Wed 4 Nov | EPA hearing on reallocating the 770m 2025 small-refinery RINs (comments due 4 Dec) | D4 and D6 RIN prices; Valero's RVO cost and its renewable diesel margin both move. |
| Wednesdays (10:30 NY) | EIA weekly inventories | Distillate stocks vs the five-year average (−10% on 23 Oct; East Coast −32%): the deficit shrinking toward 5% is a top-of-cycle marker. |
| ~9 Nov | First Russian diesel cargo under the waiver reaches the US East Coast | The headline risk made physical; management says the waiver only returns volume to July levels and the market is 600–700 kbpd short. |
| Mid-Nov | IEA Oil Market Report; OPEC MOMR | Gulf product-export recovery, Russian runs, the 2027 run and demand numbers. |
| 20 Nov | November monthly expiry | The first expiry after Marathon's print; the November $360 put ($7.25) is the short-dated version of the trade. |
| Tue 24 Nov / 21 Dec | Ex-dividend $1.20 / payment | $4.80 a year; the late-January declaration has carried a raise every year. |
| Nov–Dec (rolling) | US–Iran talks; Russian diesel deliveries under the April-2027 licence; Chinese export quotas; winter weather | The crack-spread tape that moved the stock 9% in a day. |
| Late Nov / early Dec | OPEC+ meeting | Crude supply; refiners want cheaper crude with firm products. |
| 9 Dec | FOMC decision (a hike 85% priced) | Rates; the sector trade is a rates trade at the margin. |
| 18 Dec | December monthly expiry | The recommended put's expiry; quad witching. |
| 24 Dec | Target date | Every structure on this page is valued on this day. |
| Year-end 2026 | Houston refinery purchase closes; Port Arthur hydrotreater completed | $320m for 165 kbpd of idled capacity (restart targeted end-2027); the DHT adds distillate yield where the margin is. |
| 15 Jan 2027 | January expiry | Ends before the fourth-quarter report. |
| ~28 Jan 2027 | Valero Q4 2026 results; 2027 capex and turnaround guide; dividend declaration | The next time the mid-cycle thesis is marked; the 2027 turnaround season is heavier than 2026's. |
| ~Apr 2027 | Treasury licence for Russian diesel expires | Renewal or lapse is a diesel-crack event either way. |
Daily closes. Hover for values; the table shows the same data.
| Total return | 1 week | 1 month | 3 months | 6 months | YTD | 1 year |
|---|
Valero is up this year against for Marathon, for Phillips 66 and for the energy ETF; over one month it is against for Marathon, because Valero reported first and was sold first. The refiners are the sector's leadership and its beta: they rose 55% in the third quarter and gave back 7–9% in a day on 27 October. Marathon's edge this year is the buyback and the Mid-Continent and West Coast margins; Valero's is the per-barrel number, the balance sheet and a cheaper multiple. Extreme outperformance of this kind persists while estimates rise and reverses hard when they stop; October's target raises say they are still rising, and the stock's reaction to its own record quarter says the market has started to doubt them.
Ten years of filings tell the cycle in three lines. Earnings: EBITDA ran at $3.6–4.6 billion a year from 2016 to 2019, went to −$1.5 billion in 2020, peaked at $18.2 billion in 2022 (EPS $29.04), fell to $11.9 billion in 2023 and $6.5 billion in 2024, troughed at $6.3 billion in 2025 (EPS $7.57), and is $20.9 billion over the twelve months to September 2026 (EPS $44.39), with the third quarter alone earning $23.89 a share, more than the whole of 2023. Cash returned: buybacks of $4.6 and $5.1 billion in 2022–23, $2.9 billion in 2024, $2.6 billion in 2025 and $7.3 billion over the trailing year, plus $1.4–1.6 billion of dividends every year including 2020, took the diluted share count from 464 million in 2016 to 279 million today; free cash flow was $9.8 billion in 2022 and $14.4 billion over the trailing year. Valuation: at the end of 2022 the market paid 4.4× earnings, 3.2× EBITDA and a 20% free-cash-flow yield for the peak year, because it expected the earnings to halve, which they did; at the end of 2025 it paid 21.5× and 9.3× for the trough, because it expected the recovery, which came; today it pays 9.0× trailing earnings, 5.6× EBITDA and a 13% free-cash-flow yield, and 7.5× the Street's forward $53.6. The multiple is twice 2022's for twice the earnings. For a put seller the useful arithmetic is the inverse: at the $339 break-even of the December $350 put the stock is 6.3× forward consensus, 11× a 2023-style $30, and 19× a 2024-style $18, which is where the market would stop paying for the plateau.
EBITDA (operating income plus depreciation), free cash flow (operating cash flow minus capital expenditure) and cash returned to shareholders (buybacks plus dividends), by fiscal year.
P/E and EV/EBITDA on each year's earnings at the year-end price (left); free-cash-flow yield (right). Loss years have no multiple. The last point is the trailing twelve months at today's price.
Revenue growth (bars, left) with gross and operating margins (lines, right). Multiples are paid for the first and defended by the second; the TTM point is the last four quarters.
Diluted weighted shares (left) and diluted EPS (right). A falling share count is the second engine of per-share growth: the same earnings land on fewer shares each time; a rising one (stock compensation, acquisitions) is a tax on it.
Blue candles closed up, red closed down. Orange dashed: dealer-gamma levels (call wall, put wall, gamma flip); swing support and resistance are listed in the key-levels table. Hover for the crosshair: the price is tagged on the price axis and the date on the time axis. Right panel: net dealer gamma per strike on the same price axis (blue where dealers are long gamma, red where short).
Trend: a 190% run from the December low, a record quarter sold, and a stock back on its 50-day. Valero closed 2025 near its 52-week low of $159.90 (17 December) and reached $461.52 on 14 October, two trading days before the Q3 report; the 50-day average has carried the move since February and is at , where the price closed Friday, with the 200-day at , 40% below. The report on 22 October (earnings of $23.90 a share against $21.28 expected) was sold: −2.9% on the day on 1.5 million shares, a lower close on the 23rd, then −9.2% on 27 October ($426.76 to $387.34 on 2.7 million shares, twice the average and the heaviest day of the year) as the sector was sold to fund the rotation back into the chips, a low of $377.45 on 29 October, and Friday's +3.9% to $399.66 on 2.2 million shares, a full-bodied up candle that closed above the 27–29 October range. Thirteen percent off the high, RSI , the 20-day average at $426 above the price.
Levels. Above: the 20-day at $426 and the 22 October gap area at $419–426 (the builder's first resistance at $419), then $440–460 and the $461.52 high. Below: Thursday's $377.45 low and the builder's $365 support cluster (the mid-September consolidation), then $335 (the August base) and the $320 put wall, the largest put strike in the chain; the 200-day at $286 is a different market. No report inside the window: the next is in late January.
Volume. The sell-off ran at 1.5–2.7 million shares a day against a 20-day average of , and Friday's recovery at 2.2 million: unlike Marathon, the first up day here came on volume, which is the better sign of the two. The 27 October bar is the one to watch: a close back above its open ($420) would complete the failed-breakdown pattern this site looks for; a close under $377 would say the record quarter was the top of the move for now.
Technical verdict: a strong uptrend that has pulled back to its 50-day average on heavy volume and bounced from it on Friday, with the book's largest strike ($400) at the price and the next supports at $377 (Thursday's low), $365 and $335. That is where a put strike belongs: under the September consolidation at $365, so $350 or below, with the $335 base and the $320 put wall under the break-even. The retest of $450–460 needs a close above the 20-day ($426) and through the 22 October gap; until then the stock is in a $377–426 range, and it is the more constructive of the two refiners because it is further through its correction and has no report in the way.
| Level | Price | vs spot |
|---|
Support and resistance are clustered swing lows and highs from the last eight months of daily bars; the gamma levels come from CBOE open interest.
What the profile says for Valero. A mid-sized book (open interest about contracts, net of gamma per 1% move) and, unlike Marathon's, short gamma at the price: the largest strike is the $400 put (dealers short, −$5 million), the $410 puts next, and the flip is above the price at $427.5, so the dealers chase moves in both directions until the stock is back over $427. The call wall is the same $400 strike (calls and puts both concentrated there), with call gamma at $470–480 from the run to the high; the $320 put wall is 20% down and is the largest single put position after $400. For a put seller the structure says: expect the range to be wide while the stock trades under $427 (dealers amplify), choose the strike under the $365 support rather than near the $400 cluster, and know that a close back above the flip turns the chain from an amplifier into a damper. The sign convention (dealers long customers' sold calls, short customers' bought puts) is an assumption; open interest is end-of-day (see the footnote under the chart).
How to read this. Market makers who sell options hedge them with stock; how much stock they must buy or sell as the price moves is their gamma. We estimate it from CBOE open interest for every listed strike and expiry, recompute each option's gamma with Black-Scholes from its own implied volatility, and sign it by the usual convention: dealers are long the calls customers sell and short the puts customers buy. Positive net gamma means dealers sell as the stock rises and buy as it falls, dampening moves; negative means they chase the move and amplify it. The sign convention is an assumption, and open interest is end-of-day, so the profile changes after every expiry.
Realized volatility from daily closes; implied volatility is the one-year series from Interactive Brokers' 30-day implied-volatility history, through Friday 30 October.
Solid: implied volatility of the at-the-money option for each listed expiry, on a calendar axis. Dashed: the forward volatility the market prices for the period between one expiry and the next; the spike is the earnings report. From CBOE's delayed chain.
Last three months of closes, then the range the market prices to each expiry: today's price plus and minus the at-the-money straddle (shaded, the expected absolute move) and ± one standard deviation from at-the-money IV (dotted). Green dashed: the report's target.
Out-of-the-money puts left of spot, calls right of spot, for the first monthly expiry after a month, the expiry that carries the earnings report, and January. A smile that rises to the right means upside calls are bid: the market pays up for a squeeze.
The premium is at its one-year high without a report to blame. Thirty-day implied volatility is , the th percentile of the year (rank ), against realized over the last month, and the realized number is itself the highest of the year after a 9% day and a 4% day in the same week. Valero reported on 22 October, so none of this is event premium: it is the market pricing a refiner that has started moving like a semiconductor.
The term structure is flat. At-the-money volatility is 58% for 20 November, 53% for 18 December, 52% for January and 50–51% out to September; no expiry carries an event bump, and the January expiry ends before the next report. The December straddle prices ±15.6% for seven weeks and January ±19%, against a stock whose 2026 has had two months of that size (October's fall, June's rise) and nine of less. The pricing is fair to the last two weeks and generous to the next seven, which is the seller's edge.
The smile is flat. Twenty-five-delta skew is near zero across expiries; the chain pays no fear premium for puts, so the edge is the absolute level and the time rather than the shape. That also means a put sold at $350 is priced at the same volatility as the $400 cluster: the lower strike is cheaper only by distance, not by a skew discount.
The cone. The one-standard-deviation move to 24 December is ±, 21% of the price; a $350 strike is 0.6 standard deviations below spot for December and $340 for January 0.7. The market gives a retest of $450 by Christmas a chance.
| Structure | How it is built | What you want | Risk | Best used when |
|---|---|---|---|---|
| Long call | Buy a call | A big move up, fast | The premium (100% if it expires below the strike) | You expect a move larger than the market prices; implied volatility is low |
| Bull call spread (debit) | Buy a call, sell a higher call | The stock at or above the upper strike at expiry | The net debit | You have a price target and a date; you want the highest return per dollar to that target |
| Cash-secured short put (credit) | Sell a put, hold the cash to buy the shares | The stock to stay above the strike; you keep the credit | Owning the shares at the strike in a sell-off (large, stock-like) | You would be happy to own the stock lower; volatility is high |
| Bull put spread (credit) | Sell a put, buy a lower put | The stock above the short strike at expiry; keep the credit | Spread width minus credit (defined) | You are bullish-to-neutral and want to be paid to wait with a known worst case |
| Risk reversal | Sell a put, buy a call (often for zero cost) | A large rise; behaves like stock above the call strike | Stock-like below the put strike; margin required | You want stock exposure without paying premium and accept the downside |
| Put-financed call spread | Sell a put, buy a call spread | The stock at the top of the spread; the put pays for it | Stock-like below the put strike | You want a call spread for free and accept assignment risk |
| Put spread + call spread | Sell a put spread, buy a call spread | The stock above the call spread's top strike | Both spreads' widths minus net credit (defined both ways) | You want a leveraged payout at the target and a known worst case, with part of the cost paid by the put spread |
Returns on the short-put structures below are shown on a cash-secured basis (capital = strike minus credit). Brokers typically require about 20% of that as margin; for a stock this volatile expect more.
The brief is to be paid to own the refiner that earns the most per barrel, two weeks after it reported a record quarter and was sold for it. Three expiries are priced: 20 November (20 days), 18 December (48 days) and 15 January (76 days, ending before the late-January report). The target of $450 (a retest of the October high, +13%) and the 24 December date exist so every structure is valued on the same day; for a short put the question is where the strike sits against the $377 low, the $365 and $335 supports and the $320 put wall, the ±15.6% the December straddle prices, and what the premium pays per month of that.
Scenarios on 24 December: Bear $320 (−20%, a margin reset that takes out the $365 and $335 supports and lands on the put wall; implied volatility +5 points) · Flat $400 (volatility −2 points) · Base $432 (+8%, back to the 20-day and the gap) · Bull $450 (the target; volatility −5 points) · Overshoot $480 (+20%, a new high toward the Street's top targets).
| Trade | Net | Max loss | Break-even | Delta | PoP |
|---|
Net is the mid-price debit (paid) or credit (received) per share; one contract is 100 shares. Max loss is the capital at risk per share (for a short put, the strike minus the credit). PoP is the lognormal probability, at today's implied volatility, of finishing above break-even at expiry. Scenario cells show profit or loss as a percentage of the capital at risk on 24 December (20 November trades have expired by then, so their cells are the result at expiry); −100% means a total loss. Highlighted rows are the recommendation.
| Trade | Capital at risk | P&L | Return |
|---|
Pick up to four trades. Values on the target date use Black-Scholes with each contract's own implied volatility; trades expiring before then show their value at expiry.
The recommendation is about the strike more than the timing, because Valero has already reported and the premium is not event premium: it is a refiner priced at 55% volatility for seven weeks with no catalyst of its own, which is the seller's edge. The strike goes under the September consolidation at $365 rather than near the $400 cluster where the dealers' largest strike sits, so that a retest of Thursday's $377 low, the most likely next move in a book that is short gamma below $427, leaves the position whole. Marathon's Tuesday print is the one scheduled event that can gap Valero; a seller who wants it known waits until Wednesday.
| Strike | Bid | Ask | Mid | Break-even | IV | Delta | Theta/day | Volume |
|---|
Option quotes, Greeks and the one-year implied-volatility series: Interactive Brokers at Friday's close (fetched ); open interest, term structure, smile and dealer gamma: the CBOE delayed chain, open interest of 29 October. Daily prices: Interactive Brokers to 30 October. Financial history: SEC XBRL company facts (10-K and 10-Q filings 2016–2026; EBITDA = operating income + depreciation; free cash flow = operating cash flow − capital expenditure, with the investing-cash outflow used where the capex tag is missing from 2025; year-end multiples at the last close of each year), consensus from Yahoo Finance (19 analysts). Company facts and quotes: Valero Q3 2026 earnings release and 8-K (22 Oct 2026) and the Q3 call transcript (Motley Fool, Investing.com), the $10bn buyback authorization (27 Oct 2026) and the LyondellBasell Houston refinery agreement (30 Oct 2026); Phillips 66 Q3 2026 call (28 Oct); HF Sinclair Q3 2026 call; Marathon Petroleum Q2 2026 results and 3 Nov report notice. Consensus and analyst actions: Yahoo Finance, MarketScreener, TipRanks and MarketBeat (31 Oct 2026; vendors differ on the mean target, $380–435), Jefferies (22 Sep 2026), Freedom Broker (26 Oct 2026), Trefis (earnings-day history). Refining cycle: IEA Oil Market Report (October 2026) and IEA Russian-refining commentary (17 Sep 2026), EIA (Q2 2026 review; weekly inventories to 23 Oct; October STEO), CNBC (30 Sep 2026 Hormuz flows; 17 Aug 2026; 2 Oct 2026), Columbia CGEP ('Beyond Crude'), Kpler (Jan 2026), Stillwater Associates (9 Sep 2026), Crossvol Research (forward curve, 17 Oct 2026), Goldman Sachs via Oilprice (31 Aug 2026), CFR and NPR (Russian diesel deal, 9–10 Oct 2026), Argus (California imports, 27 Apr 2026; Benicia), EPA (RFS 2026–27 final rule; 31 Aug 2026 SRE decisions), thetrading.tools and globaloilshock (3-2-1 history; trackers differ on the gasoline leg), 24/7 Wall St (23 and 28 Oct 2026), TD Cowen via Barron's (Aug 2026). Research notes: research_notes/Marathon and Valero refiners deep dive/. Written 31 October 2026; Marathon's report on 3 November and Valero's in late January will make the prose stale.