USAR Plummets 10% Amid Sector Turbulence: What's Brewing in Rare Earths?

Summary
• USA Rare Earth (USAR) trades at $15.34, down 9.97% intraday
• Intraday range spans $15.33 to $17.43, signaling sharp volatility
• Trump administration’s strategic equity stakes in critical minerals firms spark market jitters

USA Rare Earth’s 10% intraday plunge has ignited sector-wide speculation, with the stock trading near its 52-week low of $5.56. The move coincides with the Trump administration’s aggressive push to secure U.S. supply chains through direct equity investments in critical minerals firms. With turnover surging to 4.2 million shares and a dynamic PE ratio of -6.17, the stock’s technicals and geopolitical tailwinds are colliding in a high-stakes scenario.

Trump's Strategic Investments Spark Volatility
The Trump administration’s recent pivot to acquiring equity stakes in critical minerals firms—including Korea Zinc, Trilogy Metals, and now discussions with USAR—has triggered a sell-off in the sector. Investors are recalibrating risk as the administration’s $210 million CHIPS Act subsidies and 40% stake in Korea Zinc’s Tennessee smelter signal a shift toward direct ownership. For USAR, CEO Barbara Humpton’s public talks with the White House have created uncertainty, with market participants weighing the potential dilution of control against the strategic value of federal backing. The stock’s 10% drop reflects a flight to safety amid regulatory and capital structure ambiguity.

Sector Turbulence as MP Materials Leads Decline
MP Materials (MP), the sector leader, fell 3.3% intraday, amplifying concerns about the industrial metals space. USAR’s 10% drop aligns with broader sector weakness, as the administration’s equity-driven strategy raises questions about long-term profitability for smaller players. While MP’s Mountain Pass rare earth mine enjoys a 15% federal stake, USAR’s Texas project remains unsecured, creating a valuation gap. The sector’s -1.2% average decline underscores a risk-off sentiment, with USAR’s -9.97% move outpacing peers like TMC (-4.67%) and UAMY (-8.71%).

Options Playbook: Capitalizing on USAR's Volatility
• RSI: 68.78 (overbought)
• MACD: -0.15 (bearish divergence)
• Bollinger Bands: $10.38–$19.17 (current price near lower band)
• 200D MA: Empty (no long-term trend)

Technical indicators suggest USAR is oversold but trapped in a wide downtrend. The stock’s 11.82% intraday volatility and 11.91% average daily swing demand a short-term bearish bias. For options, focus on high-leverage puts with moderate deltas and strong gamma. Two top picks from the chain:

• USAR20251219P15 (Put, $15 strike, 12/19 expiry):
- IV: 114.71% (elevated)
- Leverage: 24.43% (high)
- Delta: -0.3968 (moderate)
- Theta: -0.0232 (slow decay)
- Gamma: 0.1866 (responsive to price swings)
- Turnover: 11,613 (liquid)
- Payoff (5% downside): $0.63 per share (max profit if USAR drops to $14.52)
- Why: High leverage and gamma make this put ideal for a sharp drop, with IV amplifying time value.

• USAR20251226P15.5 (Put, $15.5 strike, 12/26 expiry):
- IV: 110.69% (elevated)
- Leverage: 18.10% (moderate)
- Delta: -0.4947 (moderate)
- Theta: -0.0086 (slow decay)
- Gamma: 0.2001 (high sensitivity)
- Turnover: 7,739 (liquid)
- Payoff (5% downside): $0.77 per share (max profit if USAR drops to $14.57)
- Why: Strong gamma and IV position this as a safer play for a gradual decline, with higher strike price offering more upside.

If $15.34 breaks below $14.50, USAR20251219P15 offers aggressive short-side potential.

Backtest USA Rare Earth Stock Performance
The USAR ETF has demonstrated resilience following a -10% intraday plunge from 2022 to the present. The backtest reveals a 3-day win rate of 45.28%, a 10-day win rate of 51.89%, and a 30-day win rate of 81.13%, indicating a higher probability of positive returns in the short term. The maximum return during the backtest period was 40.94%, with a maximum return day at 59, suggesting that USAR can rebound significantly after a sharp decline.

Bullish Breakout or Bearish Breakdown? USAR at a Crossroads
USAR’s 10% intraday drop reflects a critical inflection point, with the stock teetering near its 52-week low. While the Trump administration’s equity stakes could eventually stabilize the sector, near-term volatility is likely to persist. MP Materials’ -3.3% decline underscores sector-wide caution. Investors should monitor the $14.50 support level and the administration’s next move on USAR. For now, bearish options like USAR20251219P15 and USAR20251226P15.5 offer high-reward setups if the stock continues to trend lower. Watch for a breakdown below $14.50 or a reversal above $17.43 to gauge the next phase.