Typically, consumer staples stocks are considered defensive investments in an economic slump and a bear market. Some products and services are simply essential – food and drugs being the most obvious – and consumers will continue to buy no matter what else happens. After underperforming the TSX Composite index for most of the year, Consumer Staples has recently become the one place where investors can find solace.

In fact, in the consumer staples sector, two Canadian companies are actually bucking the downtrend and posting gains, as investors seek safe harbor in strong companies in this sector. George Weston Ltd. (TSX: WN, recent price $59.50) and Metro Inc., (TSX: MRU, recent price $29.72) both large Canadian food retailers, have outperformed the broader overall market as a result.

Not to suggest that traders should jump into these stocks with both feet. But if we consider stocks that make excellent covered call writing candidates, the obvious approach is to gravitate towards companies that have the best chance to retain current values. Which by definition, takes us to defensive sectors of the economy.

The options on both George Weston and Metro Inc, trade at well above average implied volatilities. Abnormally high premiums on defensive stocks can be explained in part, by the general unrest that permeates the entire equity market. And the impact that unrest has had on the general level of option premiums.

There are two option writing scenarios with these companies. The first of course, is covered call writing. In the case of WN, you could look at buying the shares at $59.50 and writing the December 60 calls at $3.90.

The immediate concern is the downside breakeven, which for the record, is $55.60. The two month return if the stock is unchanged at the December expiration is 7.01%, and if the stock is called away, the return is 7.91%.

With MRU, buy the stock at $29.72, and write the December 30 calls at $1.80. The sale of this call reduces your out of pocket cost of the stock to $27.92. That being the downside breakeven. The two month return if the shares remain unchanged is 6.45% and the return if the stock is called away is 7.45%.

The other approach is to write cash secured puts. The goal here is to purchase the shares at prices below current levels. With MRU, for example, you could sell the December 28 puts at $1.40 per share. Think of the premium from the sale of the put as money for making a commitment to buy the shares. If the put is assigned, you would be obligated to buy MRU at $28, anytime between now and the December expiration. But your net cost for the shares would be $26.60, or 7.4% below the current price.

With WN you could look at writing the Jan 58 put for $4.10 per share. If the put is assigned, you would be obligated to buy WN at $58, anytime between now and the January expiration. But your net cost, after taking into account the put premium, would be $53.90 per share, 9.4% below the current price. Not bad entry points for defensive stocks.