Washington’s Newest Strategic Bet
And why we were already there.
Washington’s Newest Strategic Bet—and Why We Were Already There
Reuters dropped a remarkable headline Saturday evening: the U.S. government is taking a 10% equity stake in USA Rare Earth (USAR 0.00%↑) and injecting $1.6 billion into the company to secure domestic production of critical minerals.
If you’ve been following my work for a while, you probably recognize the name—because we (my subscribers and I) were already in it.
This wasn’t the first time we’ve leaned into the rare earths space. We started paying close attention to it last summer, when names in the industry began showing up via our Market Watchers X list. That’s when we placed a bullish bet on MP Materials ( MP 0.00%↑), a couple of months before the U.S. government took an equity stake in it:
So when USA Rare Earth showed up in Portfolio Armor’s Top Names on December 3rd—my system’s daily list of stocks with the highest estimated six-month return potential—it wasn’t coming out of nowhere. It was another data point lining up with a theme we were already alert to: critical materials for AI hardware and energy-adjacent infrastructure, with national-security tailwinds behind them.
From there, the story checked a lot of boxes for us: key inputs for AI-related hardware, a strategic role in U.S. industrial policy, and options liquid enough to build the sort of asymmetric structure we like. So we placed a bullish options trade on it the following day:
Earlier this week, we sold the first half of our calls in that position for a substantial profit. I also set a GTC limit sell order on the remaining calls at $17, based on our runner-pricing framework. But in light of Saturday’s news, I’ve canceled that order. Monday’s open will almost certainly give us a very different volatility surface to work with, so we’ll recalculate the runner target then.
Those exits (including this one and another we’ll mention in a moment) are logged here:
Why USAR Made Sense Back In December
Rare earths have been a national-security topic for years, but most of Washington’s moves have been incremental—grants here, loans there, pilot plants and joint ventures. The strategic vulnerability, however, hasn’t changed: China dominates nearly every stage of rare-earth processing.
USA Rare Earth stood out as one of the few U.S.-linked players positioned to chip away at that dependence. That’s why the Top Names algorithm surfaced it in December, and why it resonated with the rare-earths thesis we’d already been working from our earlier MP trade.
What I liked in early December:
It ranked highly on Portfolio Armor’s six-month potential return screen.
It fit squarely into themes that kept resurfacing in our winners—AI hardware, energy-adjacent materials, and national security.
The options market allowed a capital-efficient structure:
a long call for uncapped upside,
a short put to harvest rich implied volatility,
a long put beneath that to define the downside.
That gave us a standard three-leg combo with uncapped upside and a known floor—exactly the sort of “harvest IV, define risk” profile I want in a name that could re-rate on policy or headline risk.
As an aside, that same December alert also included a four-leg combo on SanDisk (SNDK 0.00%↑), another name tied to AI hardware and infrastructure. We exited that one this week as well, for a significant profit, which you’ll see in the exits post linked above. It’s another example of how clustering in our universe (AI hardware, critical materials, etc.) often leads to multiple winning trades at once.
How We Set (And Reset) Runner Targets On Uncapped Calls
Any time we have uncapped calls—whether they come from a three-leg combo, a hybrid structure, or a straight call trade—we manage them in two stages:
First half: we take profits on the first half at a predefined multiple of our entry price (typically ~3×). That locks in a win if it hits and derisks the position.
Second half (the runner): once that first sale happens—or once the put floor expires, or we’re 30 days from expiration, whichever comes first—we set a GTC limit sell price for the remaining calls using current market information.
The runner calculation is based on:
The current stock price,
The ATM (at-the-money) straddle for the option’s expiration—the option market’s estimate of how far the stock might move before expiration, and
A Black-Scholes estimate of what our call should be worth if the stock trades up toward the upper half of that straddle-implied range before expiration.
In simple terms, you can think of it as:
“If the stock makes another significant move in our favor, how much of that move should we capture in the remaining calls—without being so greedy that we never get filled?”
For USA Rare Earth, earlier this week that math led to a $17 target on the remaining calls. It made sense given the volatility and price structure at the time, so we set the GTC there.
Then the U.S. government decided to write a very large check.
Once a news shock like that hits—especially one involving a direct government equity stake—the option market reprices everything: implied volatility, skew, and the shape of the forward distribution. The old runner target is no longer anchored to today’s reality, which is why I canceled the $17 GTC as soon as the Reuters story crossed.
On Monday, after we see how the stock actually trades the news, we’ll:
Pull the new ATM straddle,
Plug it into the same runner framework,
And set a fresh GTC limit that reflects the updated landscape.
Where This Leaves Us
Heading into next week, we’re in a good spot:
We’ve already realized a large profit on the first half of our USA Rare Earth calls.
Our remaining exposure is via a defined-risk structure with uncapped upside on the long call.
The fundamental story just received a major vote of confidence from Washington.
The main job now isn’t to chase headlines—it’s to let the new information flow into prices, then update our runner target accordingly.
If this is a template for how the U.S. plans to secure other critical parts of the AI and energy supply chains, I doubt this will be the last time a quiet Top Name from December turns into front-page news a few weeks later.