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Norberts Gambit at BMO Investorline

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  • Mar 27th, 2017 9:15 am
[OP]
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Mar 24, 2008
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Norberts Gambit at BMO Investorline

According to PWL Capital's paper on Norbert's Gambit, here are the steps involved:

1) Buy DLR on Canadian Market
2) Call in to have a trader sell DLR.U on the US side.
3) Wait for the trade to settle in T+3 days.

Can the 2) step completed online? I am asking because this paper is almost 3 years old. Also, the trade completed by a trader costs an additional $43. I'd appreciate any pointers and things to watch out for. I am doing this in an RRSP account if it matters. Thanks in advance.
Illegitimi non carborundum
23 replies
Member
Feb 7, 2014
391 posts
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I remember doing this last year and yes...we still need to get the trader on phone to do this. And good news is that additional fees of $43 is not charged for this. Or at least it wasn't until last year. I think they consider this as a limitation for the platform and hence the fees waiver.

Good luck! Let us know how it goes so all know for future.
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Nov 18, 2007
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Valleywood
I use BMO IL and perform the NG twice a month going back to 2012.

My first step is to buy the DLR.U (US$ -> C$) and I have always had to call to have the IL rep enter the order.

(In fact during my last call, last week, the rep was convinced I could do this online and if he did it a fee of $49.95 would apply. I humoured him - what a newbie - and let him walk me through the buy order and lo and behold, DLR.U is not recognized by the client web interface. We played with the order screen for upwards of 5 minutes, before he admitted that he would have to do it with a $9.95 trade fee.)

Normally, the rep will also do my sell order of DLR, while I am on the phone. Again, only $9.95 for the trade.

Sometimes they leave me to do the sell online, but I have only done this 3 or 4 times. Two of those times, I immediately get a call from IL to confirm the short sell. This last time I placed the sell of DLR and did not get a call. That was a first.

There was a time when I would call in and during the process they would advise me that this type of trade was no longer going to be allowed. It happened 2 or 3 times, but they let me do it one more time! I have never been denied since, nor has it been brought up.

It would be ideal if they had a NG function on the BMO IL website so that we could do the currency exchange in one step, with one click - but that is not going to happen.

Saw a link to Norbert's Gambit just the other day.
[OP]
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Mar 24, 2008
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^ Thank you both. I guess I'll have to call in to sell DLR.U. I don't even mind paying $43 since I'll be doing it only once in a year but $9.95 would be better.
Illegitimi non carborundum
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Dec 11, 2007
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Markham
We do this all the time (most recent in August) without ever calling in using BCE.
[OP]
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Cerenity wrote:
Nov 2nd, 2016 7:57 pm
We do this all the time (most recent in August) without ever calling in using BCE.
Can you elaborate on this?
Illegitimi non carborundum
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Aug 4, 2014
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ksgill wrote:
Nov 2nd, 2016 7:09 pm
^ Thank you both. I guess I'll have to call in to sell DLR.U. I don't even mind paying $43 since I'll be doing it only once in a year but $9.95 would be better.
Nice timing ;) I was cursing last night that despite my efforts, I managed to spend almost all previously converted USD - and checked how much it'd cost to buy VTI without conversion... 2% at Questrade seems too steep (unless VTI fell more than 5% :)) So was ready to pay $200 on a 10K purchase lol

How much is direct currency exchange at BMO/how do you like it there?
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Nov 18, 2007
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Valleywood
BMO:
Buy US$ = 1.3667
Sell US$ = 1.3075

BMO IL:
Buy US$ = 1.3554
Sell US$ = 1.3234

NG (Based on US$10000 & $9.95 trades):
Buy US$ = 1.3462
Sell US$ = 1.334

Bank of Canada (Noon Rate) = 1.3390
[OP]
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Mar 24, 2008
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^ doesn't look too bad. I believe the conversion rate at BMO IL is ~1%... still $250 on a 25k conversion but much less hassle.

Freilona, BMO IL is good, you can get someone on the phone in under 5 minutes, don't have to sign multiple forms to enroll in DRIP and they give up to $500 for transferring your accounts to them.
Illegitimi non carborundum
Member
Dec 8, 2006
360 posts
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If you buy and sell interlisted stock, you don't need to call a trader - their system will automatically adjust in about a week. If going from USD->CAD, I recently bought TD:US, then immediately sold TD:CAD on the TSX. My account showed my long and short position for about a week, then it disappeared. More details here:

http://www.milliondollarjourney.com/sav ... gambit.htm
Million Dollar Journey - Follow my personal finance journey to $1 million in net worth. Building wealth through frugal living and investing.
[OP]
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Mar 24, 2008
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So I finished doing this trade at BMO IL. The PWL paper is correct, here are the steps:

1) Buy DLR online ($9.95 commission)
2) Call in and ask a trader to sell DLR.U ($9.95 USD commission)
3) You will see US dollars under available balance at this point.

BMO IL exchange rate - 1.3472, this rate changes based on how much you want to convert and is the lowest if you are exchanging 25k+
USD/CAD exchange rate - 1.33827
Savings ~0.9% over just exchanging it with the broker
Illegitimi non carborundum
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Oct 22, 2014
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For BMO, do the long position of DLR and short position of DLR.U cancel each other out automatically like RBC DIrect Investing or do you have to wait for few days (after journaling) before short selling DLR.U?
[OP]
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Elfwood wrote:
Nov 3rd, 2016 3:15 pm
For BMO, do the long position of DLR and short position of DLR.U cancel each other out automatically like RBC DIrect Investing or do you have to wait for few days (after journaling) before short selling DLR.U?
From what I am looking at, I see the units have cancelled each other out. I'll post in a few days if I see any difference.
Illegitimi non carborundum
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Jul 9, 2004
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Delta
ksgill wrote:
Nov 2nd, 2016 8:45 pm
Cerenity wrote:
Nov 2nd, 2016 7:57 pm
We do this all the time (most recent in August) without ever calling in using BCE.
Can you elaborate on this?
I've done this a few times myself as well. Buy BCE from TSX using CAD, then immediately sell BCE on the US markets using USD. Balances will look a little funny for the next few days but will settle automatically afterwards. Overall FX rates are very low. Just don't pick a day when the stock price might fluctuate.
[OP]
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Mar 24, 2008
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dighn wrote:
Nov 3rd, 2016 3:29 pm
ksgill wrote:
Nov 2nd, 2016 8:45 pm
Cerenity wrote:
Nov 2nd, 2016 7:57 pm
We do this all the time (most recent in August) without ever calling in using BCE.
Can you elaborate on this?
I've done this a few times myself as well. Buy BCE from TSX using CAD, then immediately sell BCE on the US markets using USD. Balances will look a little funny for the next few days but will settle automatically afterwards. Overall FX rates are very low. Just don't pick a day when the stock price might fluctuate.
With DLR, you lock in the USD/CAD rate immediately so there is no risk of a large price movement between buys and sells.
Illegitimi non carborundum

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