Final answer:
The iron condor is a high-risk option strategy that is used to generate income by simultaneously buying and selling four different options with different strike prices and expiration dates.
Step-by-step explanation:
A high-risk option strategy used to generate income is the iron condor. An iron condor involves simultaneously buying and selling four different options with different strike prices and expiration dates. This strategy profits when the underlying asset's price remains within a certain range.
Here's how an iron condor works: let's say an investor believes that the price of a stock will stay relatively stable. They would sell a call option with a high strike price and buy a call option with a lower strike price, effectively creating a range of profit if the stock stays within those strike prices.
At the same time, they would sell a put option with a low strike price and buy a put option with a higher strike price, creating another range of profit if the stock stays within those strike prices. The premiums received from selling the options generate income for the investor.