Overwrite

There are two sides to every option contract. Someone buys it. Someone sells it. The person who buys the option pays the seller to get it. Put that another way, the seller receives money (called a premium) when the option contract is written.

Overwriting is a strategy to collect these premiums. The writer of the options contract either puts the strike price very high or very low, with the expectation that the underlying asset won’t reach that level. They expect the contract to expire on exercised.

You sell a call option for shares of BAC at $40 a share, with an expiration a month from now. You get $1.50 for selling the contract. The stock is currently trading at $25. You think its very unlikely that the stock will rise 60% by the expiration date. You're technically on the hook to deliver those 100 shares of BAC if the option gets exercised. But you think that's likely not going to happen. Most likely, shares won't get anywhere near $40 and the option will expire unused. And you get to pocket the $1.50.