Gold (GLD) and silver (SLV) are surging again today — and if you followed my recent gold income strategy, you’re sitting pretty right now. I’m up all $500 on that trade playing off the 50-day moving average (MA), and here’s the thing: We can do this again.
This isn’t some complex swing trading setup that requires perfect timing. What I’m showing you is a methodical approach to generating approximately 20% returns in one month using a technical level that has proven itself repeatedly — the 50-day MA around $357.50 (keep in mind this number changes some each day after the close).
The Power of Gold’s Most Reliable Support Level
Here’s what makes this strategy so compelling: Gold holds up quite well at that 50-day MA. When I look at the charts, I see the same pattern over and over — it gets near it, bounces off of it, bounces off it, bounces off it, slightly under but finishes above it.
This isn’t about being bullish on gold. It could flip slightly bearish here or be neutral, flat, boring, dull. That’s the beauty of this approach. We’re simply making a bet that we want gold above the line by expiration.
The specific trade structure I’m using involves a $2-wide spread that delivers about 20% return on investment if gold holds up on that 50-day MA over the next month.
What’s remarkable is the margin for error built into this trade.
The Math That Makes This Strategy Shine
Let me walk you through the numbers because they’re impressive. Gold can fall almost 7.5% over the next month, which would be a pretty big drop, and we still profit.
Think about that for a moment — if it does less than a 7.5% drop, we still make 20%. If it drops 5%, we still make 20%. If it’s flat, we make 20%. If it goes up, any amount, we make 20%.
This is what I call a very neutral play. We’re giving gold a month to at least hold this line in the sand. If gold is anywhere above that line by expiration, we’re gonna make about 20% return on investment.
Now, let’s add some broader context here…
The current market conditions are quite interesting. We’re seeing fluctuations not just in gold but across various sectors. The S&P 500 (SPY) and Nasdaq (NDX) have shown volatility, which can impact sentiment in commodities like gold.
This is why it’s crucial to keep an eye on these broader market movements as they can influence our trades.
Additionally, I’ve been exploring other trades that complement this strategy. For instance, silver offers similar opportunities, and I’ve been watching how it correlates with gold. By diversifying our trades, we can manage risk more effectively and capitalize on different market conditions.
The beauty lies in the structure: We’re selling put spreads for credit at this reliable technical level, collecting premium upfront and profiting when and if the options expire worthless.
We also don’t have to buy a ton of contracts here — the efficiency of this setup means smaller position sizes can generate meaningful returns.
So, while the focus here is on gold, remember that understanding the broader market context and exploring complementary trades can enhance our overall strategy. Stay informed, stay flexible, and let’s continue to make the most of these opportunities.
Graham Lindman
Graham Lindman Trading
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*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.
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The profits and performance are not typical of any one individual. We develop tools and strategies to the best of our ability, but no one can guarantee the future. There is always a risk of loss when trading, past performance is not indicative of future results. Since the “Income Machine” is a tool designed to help traders make informed trading decisions, the results will vary for each individual user as there are multiple trades to choose from.
