USA Rare Earth Plunges 10% Intraday: What's Fueling the Selloff?

Summary
• USAR stock slumps 10.05% to $15.22, erasing $1.4B in market cap
• Q3 report highlights $142.4M non-cash fair value adjustment
• $400M+ cash reserves contrast with $156.7M net loss
• Sector peers like MP Materials (-4.24%) amplify industry volatility

USA Rare Earth's dramatic intraday selloff has ignited market speculation as the stock trades near its 52-week low. The sharp decline follows a Q3 earnings report marked by a massive non-cash accounting hit and ongoing operational losses, despite robust cash reserves. With the industrial metals sector under pressure from geopolitical trade dynamics, investors are scrambling to decipher whether this is a buying opportunity or a warning sign for the rare earths producer.

Q3 Earnings Shock Triggers Flight to Safety
The 10% intraday collapse stems directly from USAR's Q3 earnings report, which revealed a $142.4M non-cash fair value adjustment tied to financial instruments. While the company highlighted $400M+ cash reserves and strategic acquisitions like Less Common Metals, the accounting loss dwarfed operating expenses and triggered immediate profit-taking. Market participants are interpreting this as a liquidity signal - despite strong cash balances, the non-cash hit suggests valuation volatility in its complex financial structure. The selloff accelerated as investors questioned whether the company's aggressive capital raising (including $125M in Q3 equity) can offset recurring operational losses.

Industrial Metals Sector Volatility: USAR's Selloff Mirrors MP Materials' Decline
The industrial metals sector is experiencing synchronized weakness as MP Materials (MP) declines 4.24% alongside USAR. Both companies face headwinds from U.S.-China trade dynamics and supply chain uncertainties. While USAR's rare earth magnet strategy targets defense and EV markets, MP's neodymium production faces similar geopolitical risks. The sector's 2025 performance has been mixed, with recent U.S. stockpiling initiatives and China's export controls creating a volatile backdrop. USAR's 10% drop aligns with broader sector skepticism about near-term profitability despite strategic progress.

Bearish Setup: Put Options and ETF Positioning for Short-Term Volatility
• RSI: 21.11 (oversold)
• MACD: -1.90 (bearish), Signal: -1.28, Histogram: -0.62
• Bollinger Bands: $11.77 (lower) vs $15.22 (current)
• 30D MA: $24.22 (well below)

Technical indicators confirm a short-term bearish bias as USAR trades near its 52-week low. Key support levels at $15.00 and $14.50 are critical for near-term direction. The options chain reveals two high-conviction put contracts for bearish exposure:

• USAR20251121P15 (Put, $15 strike, Nov 21):
- IV: 109.08% (elevated volatility)
- Leverage: 15.57% (high gearing)
- Delta: -0.448 (moderate sensitivity)
- Theta: -0.0218 (slow time decay)
- Gamma: 0.1529 (strong price sensitivity)
- Turnover: $15,349 (liquid)
This contract offers optimal leverage for a 5% downside scenario, with projected payoff of $0.72 per share if USAR drops to $14.41.

• USAR20251121P16 (Put, $16 strike, Nov 21):
- IV: 113.39% (attractive volatility)
- Leverage: 9.44% (balanced risk/reward)
- Delta: -0.591 (high sensitivity)
- Theta: -0.0103 (minimal time decay)
- Gamma: 0.1445 (strong responsiveness)
- Turnover: $24,840 (high liquidity)
This option provides downside protection with a 5% move yielding $1.19 per share payoff. Both contracts benefit from elevated implied volatility and strong gamma characteristics, making them ideal for a short-term bearish trade.

Aggressive bears should prioritize USAR20251121P15 for maximum leverage, while USAR20251121P16 offers a more conservative entry with higher delta exposure.

Backtest USA Rare Earth Stock Performance
I attempted to generate the event list (all dates on which USAR.O fell at least 10 % below the previous-day close on an intraday basis) and feed those dates into the event-backtest engine. The data retrieval step was successful, but the event-backtest engine returned a server-side error (NameError: convert_statistics not defined). A subsequent attempt to regenerate the event list also failed with a backend variable-handling error.These are backend issues unrelated to the input parameters; therefore the results cannot be produced until the service is restored.Next-step options for you:1. Retry once the event-backtest engine is fixed (recommended – the quantitative results will then display in the interactive module). 2. Proceed with a simplified analysis now (e.g., list the −10 % plunge dates and provide a descriptive performance summary without the full statistical panel). 3. Adjust the requirement (for example, test a different plunge threshold or shorter sample period) and attempt a fresh run.Please let me know which option you prefer, or if you have any other adjustments in mind.

Act Now: USAR's Selloff Presents Strategic Entry Points
The 10% intraday selloff represents a critical inflection point for USAR, with technical indicators and options activity confirming bearish momentum. While the company's $400M+ cash reserves and strategic acquisitions like LCM provide long-term upside, near-term volatility remains elevated. Investors should monitor the $15.00 support level and watch for follow-through selling below $14.50. The sector's 4.24% decline in MP Materials underscores systemic risks in the industrial metals space. For those seeking directional exposure, the selected put options offer compelling risk/reward profiles. Watch for a potential rebound above $17.13 (intraday high) as a key reversal signal.