Norbert's gambit - Can$ to US$ or vice versa

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Re: Norbert's gambit - Can$ to US$ or vice versa

Post by Hammerer » 09 Jan 2017 21:22

DenisD wrote: Sometime later, after everything had sorted itself out, a $20 interest charge popped up. My friend called RBCDI. The rep said he couldn't see why there was an interest charge and he cancelled it.
I find this works with most bank "SERVICE CHARGE $XYZ" line items. First level CSR is similarly uninformed about what the heck it's about, but is sufficiently empowered to reverse and does so.

Always call in on these items.

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Re: Norbert's gambit - Can$ to US$ or vice versa

Post by pmj » 09 Feb 2017 12:54

RRSP at BMOIL (friend's account).
Several reports up-thread of varying processes at BMOIL. We did this, today:

Already own BCE on the Canadian side.
Not journalled.
Sell ##BCE on US mkt, requested proceeds in US$. Successful.
Bought ##BCE on CA mkt (cash available in HISA). Successful.
Bought a US stock. Successful.
(To do later - sell HISA to cover BCE buy).

Positions show:
BCE US: minus ## shares
BCE CA: orig position + ## shares
Do we need to call to journal BCE? Up-thread it was suggested this should be automatic. That was also the advice from BMOIL when we called _before_ an earlier NG.

Gripe - The current cash positions don't (yet) include the fees on each transaction. Annoying.
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Re: Norbert's gambit - Can$ to US$ or vice versa

Post by brucecohen » 28 Feb 2017 16:13

FWIW here's a way to get a little extra from NG. I've now done it twice. Last month I decided to do NG in my RRSP using RY. I timed it so that I held the shares on the ex-div date in order to receive the quarterly dividend even though the shares had been sold. The dividend, paid this past Friday, reduced my cost of each US dollar by 1.12 cents.

-- Retail forex rate I would have paid without NG: 1.3163
-- NG rate: 1.3047
-- NG rate with dividend: 1.2935

Note that this was in my RRSP so no tax diluted the extra gain -- might not be worth the bother in a taxable account.

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Re: Norbert's gambit - Can$ to US$ or vice versa

Post by adrian2 » 28 Feb 2017 16:58

brucecohen wrote:FWIW here's a way to get a little extra from NG. I've now done it twice. Last month I decided to do NG in my RRSP using RY. I timed it so that I held the shares on the ex-div date in order to receive the quarterly dividend even though the shares had been sold. The dividend, paid this past Friday, reduced my cost of each US dollar by 1.12 cents.

-- Retail forex rate I would have paid without NG: 1.3163
-- NG rate: 1.3047
-- NG rate with dividend: 1.2935

Note that this was in my RRSP so no tax diluted the extra gain -- might not be worth the bother in a taxable account.
Bruce, I don't think that's a fair calculation.
Assuming that you bought and sold RY on the ex-div date, the fact that you still received the dividend has nothing to do with the NG rate.

Simplified example:
- you had CAD100k of RY shares, paying CAD1,000 dividend quarterly
- you do a NG on the ex-div date, ending up with USD77k worth of shares
The dividends have nothing to with the rate. Think of it as if you had an asset worth CAD101k (= $100k + $1k accounts receivable). At the end of the day, you exchanged CAD100k for USD77k, the AR stayed in CAD.
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Re: Norbert's gambit - Can$ to US$ or vice versa

Post by brucecohen » 28 Feb 2017 17:09

I determined the NG rate by dividing the C$ cost of RY on the TSE divided by the US$ that wound up in the RRSP's US$ subaccount. The dividend received last week increased the amount of US$ resulting from the gambit. IOW I got more US$ for my C$ outlay.

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Re: Norbert's gambit - Can$ to US$ or vice versa

Post by Thegipper » 28 Feb 2017 18:20

brucecohen wrote:I determined the NG rate by dividing the C$ cost of RY on the TSE divided by the US$ that wound up in the RRSP's US$ subaccount. The dividend received last week increased the amount of US$ resulting from the gambit. IOW I got more US$ for my C$ outlay.
I was thinking a person might make a little on the gambit if the buy was before the ex-dividend date and the sell took place after the ex-dividend date?

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Re: Norbert's gambit - Can$ to US$ or vice versa

Post by pmj » 28 Feb 2017 19:07

The same effect would (might) occur when buying and selling any stock across its ex-dividend date. Efficient market theory says it's a zero net-sum game, with a profit potential if the price of the stock drops by less than the dividend, but a loss if it drops by more.
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Re: Norbert's gambit - Can$ to US$ or vice versa

Post by adrian2 » 28 Feb 2017 19:12

brucecohen wrote:I determined the NG rate by dividing the C$ cost of RY on the TSE divided by the US$ that wound up in the RRSP's US$ subaccount. The dividend received last week increased the amount of US$ resulting from the gambit. IOW I got more US$ for my C$ outlay.
Please re-read my answer. You had RY shares which, on the ex-dividend date, came with an Accounts Receivable in C$ (i.e., the upcoming dividend). You've exchanged the stock for US$, you did not exchange the AR.

[added later] The "simple calculation" of the NG rate assumes the CAD cost to be the cost to buy RY on the TSX. If the buy process has occurred on the same day as the sell, both the CAD and the USD sides would be ex-dividend. But you held the RY from before, hence you also got the CAD dividend, clouding the picture. To buy RY on the cum-dividend date would have cost you more, all things being equal.
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“It doesn't matter how beautiful your theory is, it doesn't matter how smart you are. If it doesn't agree with experiment, it's wrong.” [Richard P. Feynman, Nobel prize winner]

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Re: Norbert's gambit - Can$ to US$ or vice versa

Post by adrian2 » 28 Feb 2017 19:22

Thegipper wrote:
brucecohen wrote:I determined the NG rate by dividing the C$ cost of RY on the TSE divided by the US$ that wound up in the RRSP's US$ subaccount. The dividend received last week increased the amount of US$ resulting from the gambit. IOW I got more US$ for my C$ outlay.
I was thinking a person might make a little on the gambit if the buy was before the ex-dividend date and the sell took place after the ex-dividend date?
If that was true (and some people swear it is), no NG is required. Buy the stock before going ex-dividend, and sell it after.
Money for nothing!

Peter has the same answer above.
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“It doesn't matter how beautiful your theory is, it doesn't matter how smart you are. If it doesn't agree with experiment, it's wrong.” [Richard P. Feynman, Nobel prize winner]

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Re: Norbert's gambit - Can$ to US$ or vice versa

Post by brucecohen » 28 Feb 2017 19:53

pmj wrote:The same effect would (might) occur when buying and selling any stock across its ex-dividend date. Efficient market theory says it's a zero net-sum game, with a profit potential if the price of the stock drops by less than the dividend, but a loss if it drops by more.
That's what I thought before the first time I did this. That is of course what happens with mutual funds. But I checked a sample of stock prices and found there was no 1:1 impact on the market price. There likely would be if the dividend was huge, but it seems that normal trading absorbs the impact of the payout.

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Re: Norbert's gambit - Can$ to US$ or vice versa

Post by brucecohen » 28 Feb 2017 20:00

adrian2 wrote:If the buy process has occurred on the same day as the sell, both the CAD and the USD sides would be ex-dividend.
Yes, but my buy and sells occurred on different days because 1) I don't trust TDDI to journal properly and 2) I don't know if TDDI or any other broker will let an RRSP sell a stock not yet in the account. I suspect the computer will view that as a short.

Bottom line: I would up with US$310.24 more than I would have had the shares not been ex-div. Either way, the C$ cost would have been the same.

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Re: Norbert's gambit - Can$ to US$ or vice versa

Post by adrian2 » 28 Feb 2017 22:07

brucecohen wrote:Either way, the C$ cost would have been the same.
What you're missing here is that, no, the C$ cost would not always be the same.
When you buy a stock cum-dividend, the price next day reflects the AR due to you; on average, the stock price drops by the amount of the dividend.

Take out the NG hat for a moment: if what you posit is true (the C$ cost to buy a stock is the same, pre- and post-dividend), one can cycle through all the listed stocks, buy them cum-dividend, sell them the next day ex-dividend for the same price, and collect a whole bunch of dividends from every buy/sell.

On the days you did the NG, it worked right for you. You were lucky. All the power to you!
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“It doesn't matter how beautiful your theory is, it doesn't matter how smart you are. If it doesn't agree with experiment, it's wrong.” [Richard P. Feynman, Nobel prize winner]

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Re: Norbert's gambit - Can$ to US$ or vice versa

Post by adrian2 » 28 Feb 2017 22:09

brucecohen wrote:
pmj wrote:The same effect would (might) occur when buying and selling any stock across its ex-dividend date. Efficient market theory says it's a zero net-sum game, with a profit potential if the price of the stock drops by less than the dividend, but a loss if it drops by more.
That's what I thought before the first time I did this. That is of course what happens with mutual funds. But I checked a sample of stock prices and found there was no 1:1 impact on the market price. There likely would be if the dividend was huge, but it seems that normal trading absorbs the impact of the payout.
On the sample you checked, the market direction (for the stocks that you checked at least) may have been up, masking the ex-dividend effect.
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Re: Norbert's gambit - Can$ to US$ or vice versa

Post by Mordko » 28 Feb 2017 22:25

It is true that random stock movements mask the drop that occurs on the ex dividend date as well as the dividend "swelling" that occurs on a daily basis.

That does not negate the effect. Here is a HISA ETF, which illustrates the dividend effect without the random share value change noise: http://www.google.ca/finance?cid=991932947193770

There is also an effect resulting from taxes and a couple of other factors but non of it means that the price doesn't drop on ex-div dates. https://businessperspectives.org/journa ... nnelly.pdf

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Re: Norbert's gambit - Can$ to US$ or vice versa

Post by cardhu » 03 Mar 2017 15:26

The drop in stock price on ex-div day is only theoretical … stock prices are not determined by NAV in the way that mutual fund prices are.
Mordko wrote:Here is a HISA ETF, which illustrates the dividend effect without the random share value change noise: http://www.google.ca/finance?cid=991932947193770
Yabbut … RY isn’t a mutual fund ... apples and oranges.

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Re: Norbert's gambit - Can$ to US$ or vice versa

Post by GreatLaker » 19 Mar 2017 16:38

Peculiar_Investor wrote:
03 Dec 2013 14:45
The Canadian Couch Potato blog has a new entry, Norbert’s Gambit: The Complete Guide that has discount broker specific white papers for executing in a RRSP account. The blog entry has been added to the External links section of Norbert's Gambit - finiki, the Canadian financial wiki.

For those reading the finiki article for the first time, you might consider using the Article Feedback Tool at the bottom of the page to provide feedback on how to improve the article.
Justin Bender has a new series on his Canadian Portfolio Manager Blog with videos updated for Norbert's Gambit using DLR/DLR.U at the various brokers.

He also has a whole section on his YouTube page: https://www.youtube.com/channel/UC3AXuQ ... MseUu2VFHg
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Re: Norbert's gambit - Can$ to US$ or vice versa

Post by jokerit » 28 Mar 2017 11:00

Anyone have data on whether CIBC is no longer converting CAD to USD at near the spot price in RRSP accounts, given they've now added USD RRSP accounts? Presumably because they previously did not offer USD accounts, they previously converted near the spot price when buying/selling US securities, and honestly that saved me some effort.

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Re: Norbert's gambit - Can$ to US$ or vice versa

Post by nielkfj » 02 Apr 2017 22:12

Can anyone advise, which security is best for executing Norbert's Gambit?:

1) Horizons DRL/DRL.U ETF.
or
2) A high volume, low volatility interlisted stock (e.g. RY).

If the answer depends on the amount being converted, what would be the maximum that each security should be used for?

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Re: Norbert's gambit - Can$ to US$ or vice versa

Post by DenisD » 03 Apr 2017 00:19

Welcome to FWF, nielfj.

The answer depends on which broker you use. If your broker allows you to NG with two quick online trades (RBCDI, BMOIL, TDDI sometimes and possibly others), it's always best to use a high volume, low volatility, high priced inter-listed stock. High priced so the spread will be a lower percentage of the amount you want to convert.

If you have to call an agent to do the second trade at a higher fee (TDDI sometimes and possibly others), it depends on the length of time you have to wait for an agent and the amount you want to convert. If you have to wait too long, the price of something like RY could change. For higher amounts, the lower trading costs of RY could compensate for the higher fee.

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Re: Norbert's gambit - Can$ to US$ or vice versa

Post by SQRT » 03 Apr 2017 10:59

nielkfj wrote:
02 Apr 2017 22:12
Can anyone advise, which security is best for executing Norbert's Gambit?:

1) Horizons DRL/DRL.U ETF.
or
2) A high volume, low volatility interlisted stock (e.g. RY).

If the answer depends on the amount being converted, what would be the maximum that each security should be used for?
I always use CM (as I don't own it otherwise, its highly liquid and high priced). Have no problem doing $100k at a time. At TDDI I do two trades on line and phone a few days later to journal the shares over. Must do short trade first and should have a short enabled USD account. I always convert CDN to USD in a taxable account.

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Re: Norbert's gambit - Can$ to US$ or vice versa

Post by nielkfj » 03 Apr 2017 21:53

adrian2 wrote:
28 Feb 2017 22:07
When you buy a stock cum-dividend, the price next day reflects the AR due to you; on average, the stock price drops by the amount of the dividend.
Why not take a shot at getting the dividend (or at least some of it) by buying the shares the day before the ex-dividend date (i.e. cum-dividend), say just before market close. Then sell them the next day on the ex-dividend date, right when the market opens? Wouldn't it be better to be eligible for the dividend than not?

As cardhu wrote in a subsequent reply:
"The drop in stock price on ex-div day is only theoretical … stock prices are not determined by NAV in the way that mutual fund prices are."

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Re: Norbert's gambit - Can$ to US$ or vice versa

Post by nielkfj » 03 Apr 2017 22:18

I had a thought about how NG is possibly more efficient when the shares are sold first in account B:

If you sell the shares in account B first, couldn't you, at least theoretically, move the market price for the shares lower. Therefore when you subsequently buy the shares in account A the market might have moved down due to your sell order in B. Even if the shares are traded on different exchanges, isn't it possible there could be this kind of effect?

If true this would reduce the effective exchange losses, or could even result in a gain, correct?

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Re: Norbert's gambit - Can$ to US$ or vice versa

Post by adrian2 » 03 Apr 2017 22:34

nielkfj wrote:
03 Apr 2017 21:53
adrian2 wrote:
28 Feb 2017 22:07
When you buy a stock cum-dividend, the price next day reflects the AR due to you; on average, the stock price drops by the amount of the dividend.
Why not take a shot at getting the dividend (or at least some of it) by buying the shares the day before the ex-dividend date (i.e. cum-dividend), say just before market close. Then sell them the next day on the ex-dividend date, right when the market opens? Wouldn't it be better to be eligible for the dividend than not?

As cardhu wrote in a subsequent reply:
"The drop in stock price on ex-div day is only theoretical … stock prices are not determined by NAV in the way that mutual fund prices are."
If that would hold true, on average, you don't need any NG to profit from it: just buy a stock the day before the ex-dividend date, and sell it the next day. Rinse and repeat every day, therefore collecting a daily dividend. Simple, ain't it?
Imagefiniki, the Canadian financial wiki
“It doesn't matter how beautiful your theory is, it doesn't matter how smart you are. If it doesn't agree with experiment, it's wrong.” [Richard P. Feynman, Nobel prize winner]

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Re: Norbert's gambit - Can$ to US$ or vice versa

Post by nielkfj » 04 Apr 2017 21:01

adrian2 wrote:
03 Apr 2017 22:34
nielkfj wrote:
03 Apr 2017 21:53
adrian2 wrote:
28 Feb 2017 22:07
When you buy a stock cum-dividend, the price next day reflects the AR due to you; on average, the stock price drops by the amount of the dividend.
Why not take a shot at getting the dividend (or at least some of it) by buying the shares the day before the ex-dividend date (i.e. cum-dividend), say just before market close. Then sell them the next day on the ex-dividend date, right when the market opens? Wouldn't it be better to be eligible for the dividend than not?

As cardhu wrote in a subsequent reply:
"The drop in stock price on ex-div day is only theoretical … stock prices are not determined by NAV in the way that mutual fund prices are."
If that would hold true, on average, you don't need any NG to profit from it: just buy a stock the day before the ex-dividend date, and sell it the next day. Rinse and repeat every day, therefore collecting a daily dividend. Simple, ain't it?
I suppose what you are saying is correct. The only way you could profit from this is if the market was not efficient.

However, the markets are probably efficient enough to make it a practically impossible. I imagine there are computerized trading machines that monitor stocks that pay dividends, automatically calculate a lower share value ex-dividend and immediately sell shares to unwitting bidders with a price that is higher than this.

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Re: Norbert's gambit - Can$ to US$ or vice versa

Post by nielkfj » 04 Apr 2017 23:30

SQRT wrote:
20 Dec 2016 08:58
auntyvirus wrote:
gsp_ wrote:1. Short Sell RY(tsx) in CAD Margin Short(G) account. Make sure the order is executed before moving to next step.
2. Buy RY(US) in USD Margin(F) account. This is the part I'm unsure about, was hesitating between that or Buy to Cover in the USD Margin Short(H) account.
3. Call TDDI anytime in the next 3 business to request journaling of shares.
Does the order matter? It makes more sense to me that I buy RY(US) first and then sell RY(TSX). In this order I am never really short RY because the shares are already in the US account. This also makes me ask why I need a margin account at all.
Order does matter. Must do the short first. They have rules preventing the short sale of a stock you already own. I went too fast once, thinking the short sale was done (it wasn't). Had to reverse the purchase and start over again. Of course the market moved away from me in the meantime. Cost me a couple hundred bucks.
Are those rules specific to TDDI?

I'm with BMOIL. They just told me just today the exact opposite - that I must buy the shares using account A first then sell them in account B. They said that I can't sell the shares in B first if I don't own them. Does this sound correct?

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