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 larry81 »

larry81 wrote:I actually tried and they did not bulge. I was informed by the FX desk that it is 30 bps for everything over 75k. You can read my mind that i was not very enthusiasm at the idea performing a 7 figures NG !
Logged on my TDDI account today and noticed i was still long 55 TD in my USD account and short 55 TD.TO in my CAD account. Called TD and was informed that the rep make a 'typo' on the transfer slip and that it was their error.
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Re: Norbert's gambit - Can$ to US$ or vice versa

Post by somgui »

Hi all,
I urgently need lots of money and my parents are going to wire them to me from abroad. It's going to be 25K usd and I need to convert them to cad. I've read about Norbert's Gambit a while ago and I actually remembered the name :)
So, I have an account at TD waterhouse (is it called TD direct investing now?) how can I do the gambit? I didn't use TDDI that much, so I'm not very familiar with it
Thanks
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Re: Norbert's gambit - Can$ to US$ or vice versa

Post by SkaSka »

somgui wrote:Hi all,
I urgently need lots of money and my parents are going to wire them to me from abroad. It's going to be 25K usd and I need to convert them to cad. I've read about Norbert's Gambit a while ago and I actually remembered the name :)
So, I have an account at TD waterhouse (is it called TD direct investing now?) how can I do the gambit? I didn't use TDDI that much, so I'm not very familiar with it
Thanks
I find it funny that there exists 45 pages in this thread containing 1101 posts and a search bar at the top of this thread... are people really this lazy?

Here is a link to the finiki page on NG

Here is a link to the Canadian Couch Potato page on NG

Here is the White Paper by PWL Capital on doing the NG in a TD DI account

That took 1 minute of searching around this site and Google :wink:
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Re: Norbert's gambit - Can$ to US$ or vice versa

Post by crimsondr »

I've read in passing that when using DLR/DRL.U to convert from CDN to USD that the rate is locked from the moment you buy DLR. I haven't been able to find an explanation of why that is. Can anyone enlighten me?

Also, has anyone done the gambit at Questrade in an RRSP account lately? Just wondering if there were any new quirks to worry about.

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

Post by IdOp »

crimsondr wrote:I've read in passing that when using DLR/DRL.U to convert from CDN to USD that the rate is locked from the moment you buy DLR. I haven't been able to find an explanation of why that is. Can anyone enlighten me?
Each unit of DLR represents approximately US$ 10. (At last Friday's close, for example, it was US$ 9.96.) This value, to a good first approximation doesn't change. So once you've bought DLR you've basically got a bunch of things that are worth US$ 10 and that's what you'll get when you sell them. So, the amount of US$ you'll end up with is known ahead of time. Your effective exchange rate for the gambit is thus predictable and "locked in", because you know how much C$ you paid, how many US$ you'll get, and the commissions.

That's basically it. But there are fine details like that the NAV of DLR can very slowly erode with time due to the MER, and there are spreads to the selling (you may get a penny more or less per unit when you sell). Heck, your broker might even change the commissions if you wait long enough. :wink:
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Re: Norbert's gambit - Can$ to US$ or vice versa

Post by crimsondr »

IdOp wrote:
crimsondr wrote:I've read in passing that when using DLR/DRL.U to convert from CDN to USD that the rate is locked from the moment you buy DLR. I haven't been able to find an explanation of why that is. Can anyone enlighten me?
Each unit of DLR represents approximately US$ 10. (At last Friday's close, for example, it was US$ 9.96.) This value, to a good first approximation doesn't change. So once you've bought DLR you've basically got a bunch of things that are worth US$ 10 and that's what you'll get when you sell them. So, the amount of US$ you'll end up with is known ahead of time. Your effective exchange rate for the gambit is thus predictable and "locked in", because you know how much C$ you paid, how many US$ you'll get, and the commissions.

That's basically it. But there are fine details like that the NAV of DLR can very slowly erode with time due to the MER, and there are spreads to the selling (you may get a penny more or less per unit when you sell). Heck, your broker might even change the commissions if you wait long enough. :wink:
Thanks.

Is there any recommended upper limit per transaction when doing the gambit with DLR? Is is possible to move the price of DLR with a large transaction?
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Re: Norbert's gambit - Can$ to US$ or vice versa

Post by minimalist »

I'm going to be doing my first Norbert's Gambit converting CAD-->USD in my BMOIL RSP. I've reviewed the Couch Potato guide and wanted to check if this is still up to date:

"1. Buy DLR on the Canadian side of your RSP online."

"2. Call Investorline to sell DLR.U on the US side of your RSP."

"3. BMOIL will automatically journal the shares from the Canadian to the US side."

Just wanted to check if telephoning is still necessary and if the shares really will be journalled automatically or if is better to call them say the day after the trade to journal the shares.

I'll be using CM instead of DLR so I don't want to be told by the BMOIL rep to call back to sell the shares after 3 days.
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Re: Norbert's gambit - Can$ to US$ or vice versa

Post by crimsondr »

minimalist wrote:I'm going to be doing my first Norbert's Gambit converting CAD-->USD in my BMOIL RSP. I've reviewed the Couch Potato guide and wanted to check if this is still up to date:

"1. Buy DLR on the Canadian side of your RSP online."

"2. Call Investorline to sell DLR.U on the US side of your RSP."

"3. BMOIL will automatically journal the shares from the Canadian to the US side."

Just wanted to check if telephoning is still necessary and if the shares really will be journalled automatically or if is better to call them say the day after the trade to journal the shares.

I'll be using CM instead of DLR so I don't want to be told by the BMOIL rep to call back to sell the shares after 3 days.
Don't use CM unless you want 3 days equity exposure. Normally when I use an interlisted stock it's in my margin account and I always short first and then immediately cover. Luckily the stock has always moved down during the few seconds between transactions and I have a small capital gain with my exchange.

If you use a regular interlisted stock in an RSP you have to wait for the shares to journal before you can finish and the stock could move in either direction. Using DLR will lock in your exchange rate without risk.
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Re: Norbert's gambit - Can$ to US$ or vice versa

Post by minimalist »

crimsondr wrote:
minimalist wrote:I'm going to be doing my first Norbert's Gambit converting CAD-->USD in my BMOIL RSP. I've reviewed the Couch Potato guide and wanted to check if this is still up to date:

"1. Buy DLR on the Canadian side of your RSP online."

"2. Call Investorline to sell DLR.U on the US side of your RSP."

"3. BMOIL will automatically journal the shares from the Canadian to the US side."

Just wanted to check if telephoning is still necessary and if the shares really will be journalled automatically or if is better to call them say the day after the trade to journal the shares.

I'll be using CM instead of DLR so I don't want to be told by the BMOIL rep to call back to sell the shares after 3 days.
Don't use CM unless you want 3 days equity exposure. Normally when I use an interlisted stock it's in my margin account and I always short first and then immediately cover. Luckily the stock has always moved down during the few seconds between transactions and I have a small capital gain with my exchange.

If you use a regular interlisted stock in an RSP you have to wait for the shares to journal before you can finish and the stock could move in either direction. Using DLR will lock in your exchange rate without risk.
So in an RSP you always have to wait T+3 days to do the sell?
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Re: Norbert's gambit - Can$ to US$ or vice versa

Post by crimsondr »

minimalist wrote:
crimsondr wrote:
minimalist wrote:I'm going to be doing my first Norbert's Gambit converting CAD-->USD in my BMOIL RSP. I've reviewed the Couch Potato guide and wanted to check if this is still up to date:

"1. Buy DLR on the Canadian side of your RSP online."

"2. Call Investorline to sell DLR.U on the US side of your RSP."

"3. BMOIL will automatically journal the shares from the Canadian to the US side."

Just wanted to check if telephoning is still necessary and if the shares really will be journalled automatically or if is better to call them say the day after the trade to journal the shares.

I'll be using CM instead of DLR so I don't want to be told by the BMOIL rep to call back to sell the shares after 3 days.
Don't use CM unless you want 3 days equity exposure. Normally when I use an interlisted stock it's in my margin account and I always short first and then immediately cover. Luckily the stock has always moved down during the few seconds between transactions and I have a small capital gain with my exchange.

If you use a regular interlisted stock in an RSP you have to wait for the shares to journal before you can finish and the stock could move in either direction. Using DLR will lock in your exchange rate without risk.
So in an RSP you always have to wait T+3 days to do the sell?
I believe so. In an RSP account you can't sell what you don't have. And you don't have the US version of CM until it's journaled over. Someone please correct me if I'm wrong.
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Re: Norbert's gambit - Can$ to US$ or vice versa

Post by IdOp »

crimsondr wrote:Is there any recommended upper limit per transaction when doing the gambit with DLR? Is is possible to move the price of DLR with a large transaction?
It is always possible to move the market with a large enough transaction, any stock, any time. So the question is what kind of amount should be fairly safe? I just got quotes on DLR and DLR.U from TDDI. For each one both the bid and the ask have more than 1,000 board lots on offer. You'd have to get a number of quotes to convince yourself this will be typical. The amount of money represented by that is:

1000 lots X 100 units/lot X US$ 10 /unit = US$ 1,000,000

So a million dollars give or take. If the gambit is reasonably less than that I wouldn't worry about moving the market. The other question is cost. The spreads on DLR and DLR.U seem to be 1 penny these days. On $10 that is 0.0010 or 10 basis points. You might be able to do better with an inter-listed stock of high price, but you take on equity exposure and if the gambit is large the worry about moving the market comes back and may be harder to answer because there won't always be 130 lots (or however many) sitting there patiently at the first level.
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Re: Norbert's gambit - Can$ to US$ or vice versa

Post by crimsondr »

IdOp wrote:
crimsondr wrote:Is there any recommended upper limit per transaction when doing the gambit with DLR? Is is possible to move the price of DLR with a large transaction?
It is always possible to move the market with a large enough transaction, any stock, any time. So the question is what kind of amount should be fairly safe? I just got quotes on DLR and DLR.U from TDDI. For each one both the bid and the ask have more than 1,000 board lots on offer. You'd have to get a number of quotes to convince yourself this will be typical. The amount of money represented by that is:

1000 lots X 100 units/lot X US$ 10 /unit = US$ 1,000,000

So a million dollars give or take. If the gambit is reasonably less than that I wouldn't worry about moving the market. The other question is cost. The spreads on DLR and DLR.U seem to be 1 penny these days. On $10 that is 0.0010 or 10 basis points. You might be able to do better with an inter-listed stock of high price, but you take on equity exposure and if the gambit is large the worry about moving the market comes back and may be harder to answer because there won't always be 130 lots (or however many) sitting there patiently at the first level.
I have done the gambit a couple times before in my margin account with different equities. There I always shorted first and then covered immediately which always worked to my advantage. However, in my RRSP I can't short and I think the 3 days of equity exposure would be quite risky. That is why I am looking at using DLR.
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Re: Norbert's gambit - Can$ to US$ or vice versa

Post by DenisD »

I think at BMO and RBCDI, you can buy CM on the Canadian side in your RSP and immediately sell on the US side with no phone call. But I would wait for someone else to confirm.
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Re: Norbert's gambit - Can$ to US$ or vice versa

Post by icehawk21 »

As recently as today, I have been able to place an online order to buy an interlisted stock (RY) in the CAD segment of my TDDI RSP while on the phone with a TDDI trading representative, have them wait for the order to be filled and then have them immediately sell the stock in the USD segment of the RSP. They only charged the online fee for the sell order, even though it was done over the phone. And they automatically scheduled the shares to be journalled over in 3 days to cover settlement. I had no issues whatsoever and it appeared that the agent knew exactly what I was doing and didn't ask any questions or raise any concerns. I was able to convert $CAD 14,038.55 CAD to $USD 10,632.45, for an effective exchange rate of 1.32 (including the two $9.99 commissions and ask/bid, moving frictional txn costs). The posted rate at XE.com at the time I did the exchange was ~1.318.
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Re: Norbert's gambit - Can$ to US$ or vice versa

Post by Wallace »

I'm just finishing a "snowbird" vacation in Florida. I decided to work out how much I saved by having a US bank account & credit card, converting from $CAN to $US with the gambit. I paid for gas earlier this month using a Canadian VISA. On March 7 the exchange rate according to the federal website was 1.3300. VISA exchanged at 1.3714. Doesn't seem like much on a $US21.00 gas bill, but I calculated that if I had used a Canadian VISA for all my rental, living and travel expenses it would have increased my vacation bill by over $CAN500. No small potatoes!
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Re: Norbert's gambit - Can$ to US$ or vice versa

Post by SQRT »

Wallace wrote:I'm just finishing a "snowbird" vacation in Florida. I decided to work out how much I saved by having a US bank account & credit card, converting from $CAN to $US with the gambit. I paid for gas earlier this month using a Canadian VISA. On March 7 the exchange rate according to the federal website was 1.3300. VISA exchanged at 1.3714. Doesn't seem like much on a $US21.00 gas bill, but I calculated that if I had used a Canadian VISA for all my rental, living and travel expenses it would have increased my vacation bill by over $CAN500. No small potatoes!
Agree. Our expenses in USD are into 6 figures every year, So a fairly large savings using the gambit.
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Re: Norbert's gambit - Can$ to US$ or vice versa

Post by crimsondr »

Just bought DLR today in my Questrade RRSP. Opened a chat and asked the agent to journal the shares over to DLR.U. He said it would happen after the settlement so looks like I need to wait a few days. However, he never once questioned what I was doing so looks like they are pretty familiar with this move now. Assuming my rate is locked in and comparing to the spot rate at the time of my transaction I will end up paying 0.147% for the conversion.

Buying DLR didn't incur any regular trade commissions since ETFs are free to buy but I did have to pay ECN fees. Do all brokerages charge ECN fees? I'm actually thinking specifically of RY and TD?
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Re: Norbert's gambit - Can$ to US$ or vice versa

Post by adrian2 »

crimsondr wrote:Buying DLR didn't incur any regular trade commissions since ETFs are free to buy but I did have to pay ECN fees. Do all brokerages charge ECN fees? I'm actually thinking specifically of RY and TD?
TD Waterhouse does not charge separate ECN fees.
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Re: Norbert's gambit - Can$ to US$ or vice versa

Post by crimsondr »

adrian2 wrote:
crimsondr wrote:Buying DLR didn't incur any regular trade commissions since ETFs are free to buy but I did have to pay ECN fees. Do all brokerages charge ECN fees? I'm actually thinking specifically of RY and TD?
TD Waterhouse does not charge separate ECN fees.
Yup, found that out myself also after some googling. Now I regret using Questrade for my RRSP. I think in the end it would have been cheaper and more convenient to go with RBC or TD.
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Re: 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 crimsondr »

I did some calculations based on this:
Questrade
$0.0035 ecn fee
Free to buy ETF
1c/share commission to sell, $4.95/min, $9.95/max

TD
no ecn fee
$9.95 flat commission to buy/sell

DLU.TO $13.05
DLU.U.TO $9.95
VTI $107

The scenario is to convert CDN to USD via DLR.TO/DLR.U.TO and buy VTI with the proceeds. With these numbers I get the break even point in commissions between TD and Questrade is ~$35227.82 CDN. Any less and you will be ahead with Questrade. Any more and you're ahead with TD.

Also I think with large sums in an RRSP it's better to use TD since you can call them to immediately sell an interlisted stock on the US side without waiting for settlement, thus avoiding the use of DLR.TO/DLR.U.TO to lock in the exchange and avoid stock volatility.
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Re: Norbert's gambit - Can$ to US$ or vice versa

Post by zeno »

zeno wrote:Has RBCDI's exchange rate changed for the better lately?

I have some new money due to arrive in one of my accounts so I was preparing to Gambit it over to my USD account to buy VTI.

Just as an experiment, I went to the Stock Order Entry screen at RBCDI to see what rate it was converting my existing available balance at. It converted at a rate of .7193. That's actually a better rate than shown on Google finance .7180 or Oanda .718262. This is for a very small amount (sub $1000) so no bulk discount.

Have I missed anything? Used the wrong currency rate for comparison? Is the Available Balance on the stock order screen misleading me? Are actual purchases done at a less favorable rate? Or is NG no longer necessary at RBCDI?
Answering my own question here. The bottom line is, yes there is still a benefit to doing a Gambit at RBC Direct Investing, furthermore the available balance conversion from CAD to USD is not to be taken as any indication of the actual currency conversion rate.

I'll relate the results of my costly experiment, in the hopes that other will benefit.

I wanted to buy 10k of VTI a week or so ago, but I only had a seven hundred or so dollars in the US side of my account. To be exact I needed to buy 9,337.97 USD. Rather than gambit, I decided to test RBCDI's conversion rates. On the stock order screen, it was showing a rate very competitive with OANDA posted rates. On March 31st after the stock purchase, my USD cash balance showed -9,337.97. It stayed that way for several days. On April 5th, when the CDN cash was finally converted to USD, it was done so at a rate of 1.3306.

March 31st Oanda's interbank rate was 1.30255 converting 9,337.97 to 12,163.2
April 5th Oanda's interbank rate was 1.30492 converting 9,337.97 to 12,185.3
RBC's conversion rate was 1.337.97 converting 9,337.97 to 12,425.10. $240.10 more than the interbank rate so 2.5%.

Ouch, lesson relearned. Do your Gambits, especially at RBCDI where I've been able to do them online in the past without calling to journal.
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Re: Norbert's gambit - Can$ to US$ or vice versa

Post by gsp_ »

zeno wrote:RBC's conversion rate was 1.337.97[1.3306]converting 9,337.97 to 12,425.10. $240.10 more than the interbank rate so 2.5%.
1.97% but does not change your conclusion. Thanks for the data, steep vig.
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Re: Norbert's gambit - Can$ to US$ or vice versa

Post by crimsondr »

crimsondr wrote:Just bought DLR today in my Questrade RRSP. Opened a chat and asked the agent to journal the shares over to DLR.U. He said it would happen after the settlement so looks like I need to wait a few days. However, he never once questioned what I was doing so looks like they are pretty familiar with this move now. Assuming my rate is locked in and comparing to the spot rate at the time of my transaction I will end up paying 0.147% for the conversion.

Buying DLR didn't incur any regular trade commissions since ETFs are free to buy but I did have to pay ECN fees. Do all brokerages charge ECN fees? I'm actually thinking specifically of RY and TD?
Bought DLR.TO last Wednesday and immediately requested the journal via online chat. DLR.U.TO showed up in my account today one week later.

Saved on the commission, lost on the exchange lol
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Re: Norbert's gambit - Can$ to US$ or vice versa

Post by monk127 »

Hello all,

This is my first post; I've been lurking and learning here for a while though. I was wondering what people's thoughts were on doing a really really slow gambit. In my TDW RSP, I'm planning on buying some RY in CAD and then calling in after it settles and ask for it to be only journalled over to the USD subaccount but not sold. I thought that this way there's no chance TD will charge me the phone commission rate since there's no sell and I don't mind holding the stock (not in a hurry to have US cash). Then I'll sell it myself online at some later date. If I'm willing to risk CAD & RY dropping are there any other pitfalls I haven't thought of?
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