Need to branch off a receptacle series, but not at the end of the run. Best practices?
Your Option 1 is 100% acceptable. Several key points to keep in mind:

Make sure you use appropriate gauge wire.

If the existing wire is 12/2, it's likely that you've got a 20amp breaker and your new wiring must be 12/2. It's possible that you've got a 15amp breaker and the wire is over provisioned and that's perfectly acceptable. I'd suggest sticking with 12/2 in case someone (maybe you) ever replaces the breaker with a 20am based on the cable they see in the panel &amp; don't check all the wiring on the circuit.
If your existing wiring is 14/2, you've got a 15amp breaker (or a code violation and potential fire starter), and you can use 14/2 or 12/2 wiring for the new extension.


Is the outlet switched? If so, be careful about how you attach wiring to ensure that your new outlet is switched or is not switched, depending on what you're after.


Based on a comment on the OP about replacing the box with a larger one to ensure there's enough room for wiring:

Removing wiring from an existing box in a wall can be a bit of a... challenge...

If you need to increase the size of the box, you may be better off going with your Option 2




Your Option 2 is also acceptable with caveats:

It's likely that when you cut the supply cable leading to the outlet that you will no longer have enough cable available to make into the box with both cut ends and have enough cable in the box to meet code requirements for all the wiring.

This can be rectified by using 2 junction boxes. Feed the wires into one box and connect them to a short piece of wire that then leads into the second box. In the second box, pig-tail the wires to the existing cable leading to the existing outlet and to the new cable leading to the new outlet.