Overwriting (yield enhancement)
Definition · Level 1 · Options basics
Keep reading with Tradecraft
Without a subscription, you can read three definitions every 30 days. Tradecraft explains all 988 terms and strategies, with the lessons that teach them, flashcards that come back before you forget, quizzes and a payoff lab.
Writing calls against shares you already hold, to earn extra income from the premium, at the price of capping the upside.
Example
Owning XYZ for years and selling a new one-month call each month is overwriting.
Where Tradecraft teaches it
Level 1 · Options basics, in the lesson “The covered call”: Construction, breakeven, max profit and max loss, and why it looks like a short put.
Related terms
- Called awayHaving your shares sold at the strike because a short call written against them was exercised and assigned to you.
- Covered CallOwn 100 shares and sell one call against them.
- 0DTE“Zero days to expiration”: options on their final trading day.
- AM vs PM settlementWhether a cash-settled index option’s final value comes from opening prices on expiration morning (standard monthly SPX, last trade the day before)…
- American-styleExercisable on any business day up to and including expiration; the norm for US stock and exchange-traded fund (ETF) options.
- AssignmentNotice that an option you are short has been exercised, obliging you to sell (short call) or buy (short put) the stock at the strike.