MP Materials Plummets 7.4% Amid Rare Earth Export Truce: Is the Bubble Deflating?

Summary
• MP Materials (MP) plunges 7.4% to $58.43, its lowest since November 2024
• U.S.-China trade agreement delays rare earth export curbs, sparking sector-wide jitters
• $500M Apple partnership and $400M DoD investment contrast with bearish technicals
• Options volatility surges as 20 contracts trade above 95% implied volatility

MP Materials, the U.S. rare earths leader, has plunged nearly 7.4% in volatile intraday trading, trading at $58.43 as of 6:28 PM ET. The selloff follows a U.S.-China trade agreement delaying Beijing’s rare earth export restrictions, shaking investor confidence in MP’s market dominance. Despite strategic partnerships with Apple and the DoD, technical indicators and options data suggest a bearish near-term outlook, with key support levels under pressure.

U.S.-China Rare Earth Truce Sparks Sector-Wide Jitters
The U.S.-China trade agreement, announced earlier this week, has delayed Beijing’s rare earth export curbs for one year, directly challenging MP Materials’ strategic positioning. While the company benefits from a $500 million partnership with Apple and a $400 million DoD-backed magnet production guarantee, the agreement signals increased global supply from China, a dominant player in rare earth processing. This threatens MP’s ability to maintain premium pricing and margins, particularly as U.S. allies like Australia and India also expand rare earth production. The market is now pricing in a near-term risk of margin compression, with investors reevaluating MP’s long-term value proposition in a more competitive landscape.

Rare Earth Sector Volatility Intensifies as U.S. Allies Expand Capacity
The rare earth sector is experiencing heightened volatility as geopolitical and supply-side dynamics shift. While MP Materials faces pressure from increased Chinese exports, U.S. allies like Australia and India are accelerating domestic production. For instance, Wyoming’s Brook Mine, now validated by Fluor Corporation, could supply 3-5% of U.S. magnet demand, reducing reliance on MP’s vertically integrated supply chain. Additionally, India’s recent import license restrictions on Chinese rare earths—barring re-exports to the U.S.—highlight the sector’s fragmented and politically charged nature. These developments underscore a broader trend of diversification, diluting MP’s market control and amplifying sector-wide uncertainty.

Bearish Technicals and Volatile Options Signal Short-Term Hedging Opportunities
• 200-day MA: $42.73 (far below current price)
• RSI: 17.61 (oversold territory)
• MACD: -2.28 (bearish divergence)
• Bollinger Bands: Price at $58.43, below the $54.64 lower band
• 30D Support: $73.76–$74.47 (broken)

MP’s technicals paint a bearish near-term picture, with the stock trading below key moving averages and RSI in oversold territory. The Bollinger Bands suggest a potential rebound toward the $54.64 level, but the MACD’s negative divergence and low RSI indicate further downside risk. For options traders, two contracts stand out:

• MP20251107P58 (Put, $58 strike, Nov 7 expiry):
- IV: 108.36% (extreme volatility)
- Delta: -0.4297 (moderate sensitivity to price moves)
- Theta: -0.0642 (moderate time decay)
- Gamma: 0.0527 (responsive to price swings)
- Turnover: $99,807 (high liquidity)
- LVR: 23.06% (moderate leverage)
- Payoff at 5% downside ($55.51): $2.49/share
This put option offers a balance of leverage and liquidity, ideal for hedging against a potential breakdown below $58.

• MP20251107C60 (Call, $60 strike, Nov 7 expiry):
- IV: 100.31% (high volatility)
- Delta: 0.4573 (moderate directional exposure)
- Theta: -0.4766 (aggressive time decay)
- Gamma: 0.0574 (high sensitivity to price swings)
- Turnover: $859,380 (exceptional liquidity)
- LVR: 26.25% (strong leverage)
- Payoff at 5% downside ($55.51): $0 (out of the money)
While the call option is out of the money, its high gamma and liquidity make it a speculative play for a short-term rebound above $60.

Aggressive short-sellers may consider MP20251107P58 as a core position, while bulls should watch for a bounce above $60. If $54.64 breaks, the stock could test the 52W low of $15.56.

Backtest MP Materials Stock Performance
The back-test is complete. A visual report has been generated for you – please expand the module below to explore full details (equity curve, trade list, distribution, etc.). Key Findings (quick view)• Cumulative return: -25.2 % • Annualized return: 8.2 % (achieved through a handful of outsized winners; beware volatility) • Maximum draw-down: 75.8 % – very high, indicating substantial risk. • Average trade return: 0.3 %; however, losses (-8.3 %) occur frequently and winners (≈11.4 %) are scarce, leading to overall negative P&L. • Best single-trade gain: 28.7 %; worst single-trade loss: -14.3 %.Parameter notes (auto-selected defaults):1. Take-profit 15 % – common near-term rebound target for oversold events.2. Stop-loss 8 % – aligns with the 7 % plunge trigger while allowing limited further downside.3. Max holding 10 trading days – focuses on short-term mean-reversion, avoiding long capital tie-up.Interpretation & suggestions:• The strategy captures occasional sharp bounces but fails to offset frequent small losses, resulting in negative cumulative P&L and severe draw-downs. • Consider tightening stops (e.g., 5 %) or using intraday exits to limit losses. • Adding a trend filter (e.g., only buy when MP is above its 200-day MA) may reduce trades during prolonged down-trends. • Evaluate alternative profit-taking levels or scaling out to lock gains sooner. • Explore multi-factor confirmation (volume spikes, RSI oversold) to improve signal quality.Feel free to adjust parameters or add filters, and let me know if you’d like to iterate or test variations.

MP Materials at Crossroads: Hedge or Hold as Sector Uncertainty Lingers
MP Materials’ 7.4% intraday drop reflects a market grappling with the dual forces of geopolitical trade agreements and sector diversification. While the company’s DoD and Apple partnerships provide a floor for demand, the U.S.-China truce and emerging competition from allies like Australia and India pose significant margin risks. Technically, the stock is oversold but lacks immediate catalysts for a rebound. Investors should monitor the $54.64 support level and the sector leader ProShares Ultra Consumer Discretionary (UCC), which has gained 2.15% today, for broader market sentiment. For now, hedging with MP20251107P58 or scaling into longs above $60 offers the most balanced approach in this high-volatility environment.