Slump in Railroad Stocks Raises Implied Volatility

Yesterday's move higher in volatility and put volumes in a bevy of diversified industrial stocks -- despite a relatively flat finish for stocks -- continued apace today, with traders seeking defensive positions in transportation names. Adding urgency to the options positioning today is the biggest intraday drop in the value of the S&P Railroad Index in two decades, sending implied volatility in the options of most railroad stocks hurtling toward 52-week highs.

According to live market data from Interactive Brokers, implied volatility in Norfolk Southern (NSC - commentary - Cramer's Take) rose nearly 28% on the session to read 71.7% -- handily a 52-week high and fully a 45% premium to the historic reading on the stock. With shares down 12.6% to $56.84, front-month call premiums are down more than 60%, with what appears to be buying interest in October 65 calls and selling in 55 puts.

Union Pacific's (UNP - commentary - Cramer's Take) implied volatility is likewise hovering at 52-week highs, ticking in almost 10% higher today at 64.7%, against a historic reading of 53.7% and speaking to the heightened level of risk anticipation in Union Pacific stock. Front-month puts at strikes 60 and 65 are attracting heavy volume.

Shares in CSX Corp (CSX - commentary - Cramer's Take) are down more than 10% at present, coming in at $47.57, as option traders have shown selling interest in October 45 puts, possibly taking profits in these positions, as the value has risen some 124% today.

Implied volatility gains have extended to trucking companies, also against a backdrop of precipitous share-price declines. Composite 30-day implied volatility in Ryder Systems (R - commentary - Cramer's Take) options is up 28% to 77.9% (vs. 58.5% historic volatility on Ryder stock). And shares in sector peer J.B. Hunt (JBHT - commentary - Cramer's Take) dropped 12% to $29.33, below the lowest available strike in the front-month calendar, and as option traders appeared to seek long positions in November 30-strike puts.

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At the time of publication, Darst had no positions in the stocks mentioned.

Rebecca Engmann Darst is an equity options analyst for Interactive Brokers in Greenwich, Conn., and is the author of its daily "Options and Futures Intelligence Report." Each Thursday at 6:30 a.m. EST, she delivers the early-morning lowdown on option volume and sector trends on CNBC's "Squawk Box." She also appears on BNN Canada and has been a guest on Fox News' "Your World With Neil Cavuto."

Prior to her work in the equity options market, she spent seven years in Scandinavia as a Copenhagen-based chief reporter for a European Commission news service, correspondent for Spanish daily El Mundo and Radio Netherlands, followed by stints at Nordea Bank and Saxo Bank.