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The arm stays parallel as the hammer breaks the plane of the head.
The overhead lever is used to train ulnar deviation of the wrist. Stand with the arm straight out to the side of the body, hand at head height. Hold the sledge hammer in the outstretched hand with the handle pointing straight up. Keeping the arm straight and hand high, slowly lower the hammer head until it breaks the plane of the head, then return it to vertical. Be prepared to catch the hammer with the other hand should the attempt fail. A 10lb overhead lever is a respectable lift. Some extremely strong men have performed this exercise with hammers in excess of 20 pounds.
Overhead Lever
Watch the Video - Overhead Lever (WMV)
