Hagerty's 18.45% Plunge: Secondary Offering Sparks Investor Exodus

Summary
• Hagerty (HGTY) plummets 18.45% to $9.02, its worst intraday drop since March 2023
• Secondary offering by Hagerty Holding Corp and Aldel LLC triggers 8.7M-share dilution
• 52-week range of $8.03–$12.35 now under pressure as price nears 52W low

Hagerty’s stock has collapsed amid a massive secondary offering, triggering a 18.45% intraday plunge to $9.02. The move, driven by 8.7 million shares sold by existing shareholders, has pushed the stock closer to its 52-week low of $8.03. With the insurance sector mixed and technical indicators flashing bearish signals, the stock faces a critical juncture as liquidity floods the market.

Secondary Offering Triggers Investor Exodus
Hagerty’s 18.45% intraday plunge is directly tied to a secondary offering announced by Hagerty Holding Corp and Aldel LLC, which sold 8.7 million shares to institutional investors. The move, led by KBW and JPMorgan, has flooded the market with liquidity, triggering a self-fulfilling sell-off. With 342 million shares outstanding and 84 million in public float, the offering represents a 2.5% dilution to existing shareholders. Analysts have downgraded the stock to 'hold' or 'sell,' with a median price target of $11, suggesting the market is pricing in significant earnings pressure from increased share supply.

Insurance Sector Mixed as CNA Trails
The insurance sector remains fragmented, with CNA Financial (CNA) down 1.15% and Heritage Insurance (HRTG) up 4.71%. Hagerty’s collapse contrasts sharply with HRTG’s 64.59% YTD gain, highlighting divergent investor sentiment. While HRTG benefits from strong underwriting margins and a 12.71% profit margin, Hagerty’s 1.52% margin and elevated debt-to-equity ratio (30.43%) exacerb its vulnerability to dilution. The sector’s mixed performance underscores Hagerty’s unique challenges amid its secondary offering.

Options Playbook: Capitalizing on Volatility and Technical Breakdowns
• 200-day average: 9.9767 (above)
• RSI: 64.01 (neutral)
• MACD: 0.206 (bullish)
• Bollinger Bands: 9.57–11.05 (price near lower band)

The technical landscape for HGTY is a mix of bearish and mixed signals. While the 200-day MA at $9.98 and RSI at 64 suggest overbought conditions, the MACD histogram of 0.0534 hints at lingering bullish momentum. However, the stock’s proximity to the lower Bollinger Band ($9.57) and 30-day support at $10.00 indicates a critical juncture. The XLF (XLF) and XLV ETFs remain relevant for sector exposure, though HGTY’s standalone volatility dwarfs sector peers.

Top Options Plays:
• HGTY20260220P7.5 (Put, $7.5 strike, 2026-02-20):
- IV: 34.09% (moderate)
- Leverage: 35.70%
- Delta: -0.181558
- Theta: -0.001094
- Gamma: 0.117714
- Turnover: $50
- IV (Implied Volatility): Reflects market uncertainty
- Leverage: Amplifies downside potential
- Delta: Sensitive to price swings
- Theta: Slow decay
- Gamma: High sensitivity to price movement
- This put option offers asymmetric upside in a bearish scenario. With a 35.70% leverage ratio and 34.09% IV, it’s positioned to benefit from a 5% downside move (projected price: $8.44). Payoff would be max(0, $8.44 - $7.5) = $0.94 per share.

• HGTY20260220C10 (Call, $10 strike, 2026-02-20):
- IV: 77.43% (elevated)
- Leverage: 5.25%
- Delta: 0.550070
- Theta: -0.005771
- Gamma: 0.077766
- Turnover: $0
- IV: High volatility premium
- Delta: Balanced sensitivity
- Theta: Moderate decay
- Gamma: Moderate responsiveness
- This call option is ideal for a rebound trade. With 77.43% IV and a delta of 0.550070, it captures upside if the stock breaks above $10.00. A 5% rebound to $9.33 would yield max(0, $9.33 - $10) = $0.00, but IV decay could offset losses.

Trading Setup: Key levels to watch are $9.57 (lower Bollinger Band) and $10.00 (30-day support). A break below $9.57 could trigger a test of the 52W low at $8.03. For aggressive bulls, the HGTY20260220C10 offers a high-IV play on a rebound above $10.00. For bears, the HGTY20260220P7.5 provides leverage on a sustained decline.

Backtest Hagerty Stock Performance
The iPath S&P 500 VIX Short-Term Futures ETN (HGTY) has historically shown resilience following a significant intraday plunge of at least -17%. Backtesting reveals a 3-day win rate of 51.78%, a 10-day win rate of 48.22%, and a 30-day win rate of 53.78%. While the ETF tends to rebound in the short term, the maximum return during the backtest period was only 0.30%, indicating limited gains in the immediate aftermath of such events.

Act Now: Hagerty at Crossroads—Support or Breakdown?
Hagerty’s 18.45% plunge has created a critical inflection point. The stock’s proximity to $9.57 and $10.00 support levels, combined with the secondary offering’s dilutive impact, suggests a high probability of further downside. However, the 77.43% IV in the $10 strike call hints at lingering bullish sentiment. Investors should monitor the Universal Insurance Holdings (UVE) sector leader, which fell 2.3% today, for broader insurance sector cues. Immediate action: Watch for a breakdown below $9.57 or a rebound above $10.00 to dictate next steps. For now, the HGTY20260220P7.5 put offers a high-leverage, high-IV play on a potential 5% downside move.