The Trump Administration has recently invested $35.6 million in Trilogy Metals to promote mining in Alaska’s Ambler Mining District. This investment includes the U.S. Department of War acquiring 10% of Trilogy Metals by purchasing 8,215,570 units at $2.17 each, along with a similar purchase from South32. As a result, the U.S. government will own 10% of Trilogy Metals and has the option for an additional 7.5% stake through warrants. The agreement also permits the department to appoint a director to the Trilogy Metals board for three years.

Exploration Funding

These funds will be used to explore the Upper Kobuk Mineral Projects, which contain valuable metals such as copper, gold, and rare earth elements. A planned 211-mile highway will make it easier to access the mining district. After the announcement, Trilogy Metals’ stock jumped 240%, increasing from $2.09 to $7.13. The stock also received upgraded targets, with Cantor Fitzgerald giving it a buy rating and a target price of $10. In a previous investment, the U.S. government put $8.9 billion into Intel as part of the Chips and Science Act. Last quarter, Trilogy Metals reported a net loss of 1 cent per share and has struggled to achieve profitability in recent years. The recent 240% increase in Trilogy Metals (TMQ) caused the implied volatility of its options to soar. This volatility remains high, showing that the market is uncertain whether the stock will stabilize or continue rising toward the new $10 target set by analysts. Traders might consider premium-selling strategies, like covered calls, if they think the initial excitement has peaked.

Government Investment Patterns

This government investment isn’t unique; a similar, larger stake was acquired in Intel during the summer of 2024. This reflects a trend of targeting sectors vital for national supply chains, including critical minerals and semiconductors. Derivative traders should now look for other junior miners or domestic tech companies and consider buying inexpensive, long-dated call options on potential candidates. The attention on the Ambler Mining District has positively impacted the overall domestic mining sector, not just TMQ. Since the announcement, funds have flowed into related stocks, with the VanEck Rare Earth/Strategic Metals ETF (REMX) gaining over 4% in the past month alone. Buying call options on such ETFs offers a broader strategy on this trend without the high risk associated with a single, unprofitable exploration firm. This situation reminds us of the clean energy boom driven by government action in 2020 and 2021, when the Invesco Solar ETF (TAN) experienced a major surge before undergoing a significant correction. This historical pattern indicates that while growth can be rapid, reversals can occur just as quickly. Employing defined-risk option strategies, such as bull call spreads, may help capture upside potential while shielding traders from sudden volatility spikes. These trading opportunities depend heavily on the current administration’s industrial policies, making them sensitive to political news. Recent reports indicate that inflation, which the Bureau of Labor Statistics reported at an annual rate of 3.8% last month, remains a significant political issue that could affect future government spending priorities. Therefore, it’s wise to keep positions short-term, focusing on option expirations within the coming months to limit exposure to unexpected policy changes. Create your live VT Markets account and start trading now.

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