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A speculative option strategy that involves selling call or put options on stocks that are believed to be overpriced or underpriced; the options are expected not to be exercised.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.
An option strategy that involves writing more option contracts than the writer expects to have exercised. A writer overwrites contracts in order to collect the premiums. He/she chooses the securities underlying the contracts based on whether they are overvalued or undervalued. One overwrites calls if one believes that the underlying securities are overvalued because one expects a price correction that will result in the calls going out-of-the-money. For the same reason, one overwrites puts if one believes that the underlying securities are undervalued.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved
In options trading, the writing of more options than one expects to have exercised. Investors overwrite call options because they consider the underlying stock overvalued. Investors overwrite put options because they consider the underlying stock undervalued.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.