Last week, a tentative deal was announced between unions and the railroad companies averting a national strike that could have seen 125,000 railroad workers go on strike. It also avoided a major economic disruption at a time when a recession remains a real possibility. Since the announcement of the deal on the morning of Sept. 15, railroad stocks are generally lower.

Part of the reason for investor apathy around railroad stocks may be that the White House-brokered deal could still fall apart if one of the 12 unions involved fails to ratify a new contract. Essential details in the agreement have yet to be ironed out. Some union leaders feel the agreement’s language was intentionally vague so as not to back the railroads into a corner on various issues such as sick leave and unsafe working conditions. 

However, as a rule, railroad stocks tend to be good long-term investments. Berkshire Hathaway’s (NYSE:BRK-B) $26.7 billion purchase of Burlington Northern Santa Fe railroad in February 2010 has certainly proven prosperous. In a 2021 annual letter to Berkshire Hathaway shareholders, Warren Buffett referred to the railroad as Berkshire’s second most valuable asset.

If you’re looking to bet on railroad stocks but worried about the agreement falling through, options are an excellent way to get in on the action without making too much of a financial commitment. Here are the three railroad stocks I would consider and the appropriate options to make it happen.

CSX (CSX)

The Florida-based railroad has rail service up and down the East Coast and Midwest. In 2021, CSX’s (NASDAQ:CSX) 10 largest yards and terminals processed 5.9 million railcars or intermodal containers. Its three largest are in Waycross, Ga., Chicago, and Indianapolis. 

The railroad’s four major transportation networks are the Interstate 90 Corridor between Chicago and New York, the Interstate 95 Corridor between Chicago and Florida, the Southeastern Corridor between Chicago and Atlanta, and its Coal Network, which services all of the major coal producers in the Southeast, Mid-Atlantic and Northeast. At the end of 2021, CSX owned or had long-term leases on 65,180 freight cars and intermodal containers with approximately 87% in service.   

On Sept. 15, CSX announced a management changeup. Current CEO James M. Foote will retire on Sept. 26, after almost five years in the top job. He’ll remain an advisor until March 31, 2023, to help with the transition. Joseph R. Hinrichs, the former president of Ford’s (NYSE:F) automotive business, is joining the company as the new CEO.  

Analysts are generally optimistic about CSX stock. Of the 28 covering it, 19 rate it “overweight” or “buy.” Only one rates it a “sell.” The average target price of $35.68 is 19.4% higher than the current share price.

The call option I would consider is the Oct. 21 $32.50 contract, which currently costs 28 cents to buy. So, the breakeven is $32.78 and you’ve got approximately one month to see its share price increase by 9.7% or more in that time.   

Westinghouse Air Brake Technologies (WAB)

Wabtec, short for Westinghouse Air Brake Technologies (NYSE:WAB), is the first of two railroad-related stocks. The company makes equipment and components for railroad locomotives, freight cars, subway cars, buses and mining equipment.

For an idea of the type of products Wabtec provides the railroad industry, take a look at the company’s recent announcement regarding an order from Hitachi Rail. Hitachi is building monorail stations for Panama’s L3 monorail. The order was for 300 half-height platform screen doors. Wabtec is a global leader in these platform screen doors, which are used to keep passengers or objects from falling on the tracks. The company installed the world’s first platform screen doors in Hong Kong in 2002 and recently equipped the Copenhagen metro with them.

The company finished the second quarter with a total backlog of $23.23 billion, up 7.9% from a year earlier. Over the past 12 months, it added $6.57 billion in backlog, up 12.8%.

Analysts are lukewarm on WAB stock. Eight of the 15 covering it give it an “overweight” or “buy” rating. The average target price of $103.42 is 16.5% higher than the current share price. 

The Oct. 21 $100 call contract looks interesting. The ask is just 30 cents, so the breakeven would be only 13% higher than where shares trade today. You’re out $30 per contract if they don’t get there.   

Trinity Industries (TRN)

Trinity Industries (NYSE:TRN) is a company whose stock has performed poorly for long-time shareholders. It is up just 7.5% over the past five years compared with a 55% advance for the S&P 500. 

I recommended the stock as a “buy” back in early 2016 because its share price had been hit hard by lower railcar demand. Ultimately, the demand would return, and Trinity’s railcar revenues would return to historical norms. The rest of its business — construction products, inland barges, energy equipment, and railcar leasing and management — were generating 30% operating profit. However, the other businesses have mostly been sold off in the ensuing years. 

In early January, Trinity sold its highway products business to a private equity firm for $375 million. It used $250 million of the proceeds to buy back stock held by activist investor ValueAct Capital, which first took a stake in July 2016. It repurchased 8.78 million shares at $28.49 a share, well above the current price. That reduced ValueAct’s ownership to 4.4%. As of June 30, ValueAct held just 90,847 shares.

In 2018, Trinity spun off its infrastructure and barge business into a separate publicly traded company. Investors got one share of Arcosa (NYSE:ACA) for every three shares held in Trinity, providing added value for longtime TRN shareholders. 

After these two moves, the company was left to focus on its railcar manufacturing, leasing and management-related services. In the first six months of the year, revenue rose 43% from a year ago to $889.5 million, while its operating profit was up nearly 17% to $127.8 million. Its backlog at the end of the second quarter was $2.2 billion, up 86% from a year earlier.

The call option I’d consider is the Oct. 21 $25 contract. It’s got a 40-cent ask price for a breakeven of $25.40, just 8.6% higher than its current share price.

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.