Molycorp (NYSE:MCP), Rare Element Resources (AMEX:REE), China Shen Zhou Mining (AMEX:SHZ), Avalon Rare Metals (AMEX:AVL) Continue to Ride Rare Earth Speculative Frenzy

Molycorp (NYSE:MCP), Rare Element Resources (AMEX:REE), China Shen Zhou Mining & Resources (AMEX:SHZ) and Avalon Rare Metals (AMEX:AVL) share prices have been soaring, and options traders have been feeding on the companies as well.

And apparently some have even grouped in Qiao Xing Universal Resources (Nasdaq:XING) with the rest, having a tenuous connection, at best, to rare earths, as their primary metals are molybdenum and copper.

Rare Element Resources had 18,000 calls and 9,150 puts traded on them Wednesday.

Qiao Xing Universal Resources attracted about 8,000 calls and 300 puts. January and June calls were the most actives, with over 3,000 traded in each and three quarters trading at the ask.

All of this started when China released a statement saying they were going to cut rare earth quotas by 35 percent, causing the feeding frenzy to begin.

Fear and emotion is driving all this, but the reality is the sector seems to be ready to supply the majority of the demand going forward, and in a couple of years supply could outpace demand, even with China's move.

But riding emotion is the name of the game for speculators and traders, and they're making a killing, whether or not the fears and worries are based on reality.

Avalon Rare Metals closed Wednesday at $6.54, up $0.11, or 1.71 percent. Qiao Xing Universal Resources soared to $2.71, gaining $0.86, or 46.49 percent. Rare Element Resources ended the session at $14.79, up $1.85, or 14.30 percent. China Shen Zhou Mining & Resources exploded to $9.29, up $3.79, or 68.91 percent. Molycorp closed at $49.30, up $3.12, or 6.76 percent.