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 Quote - Cramer on NSC - Stock Picks) 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 Quote - Cramer on UNP - Stock Picks) 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 Quote - Cramer on CSX - Stock Picks) 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 Quote - Cramer on R - Stock Picks) options is up 28% to 77.9% (vs. 58.5% historic volatility on Ryder stock). And shares in sector peer J.B. Hunt(JBHT Quote - Cramer on JBHT - Stock Picks) 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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