# Exchanging a large sum of CAD into USD at iTrade using Norbert's Gambit



## xcyber (Apr 29, 2019)

This post has 2 questions

*Question 1*
I have to exchange a large sum (> 200K) from CAD to USD. 
Is Norbert's Gambit the way to go or are there better options?

*Question 2*
I have read PWL post about the Gambit but it's outdated (2013)
(Unable to post link) www?pwlcapital.com/resources/norberts-gambit-scotia/
There are various posts in this forum but none newer than 2016 or so.
I'd like to know if someone executed this at iTrade (Non- Registered Account) recently (2018 or 2019)

Will highly appreciate step-by-step instruction as I don't want to mess up the huge transfer amount.


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## humble_pie (Jun 7, 2009)

xcyber said:


> This post has 2 questions
> 
> *Question 1*
> I have to exchange a large sum (> 200K) from CAD to USD.
> ...



why not query Knightsbridge?

currency exchange house often rec'd by cmffers. I for one know TD personnel who exchange larger amounts - the example i was given was $90k - at knightsbridge. Usually they obtain spot rates. They know how to gambit but for larger amounts they spare themselves the hassle.

other k'bridge advantages: no gambit technicalities, no worries of the kind the OP is fretting about above. Plus funds are immediately available after FXing.


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## AltaRed (Jun 8, 2009)

xcyber said:


> I have read PWL post about the Gambit but it's outdated (2013)
> (Unable to post link) www?pwlcapital.com/resources/norberts-gambit-scotia/
> There are various posts in this forum but none newer than 2016 or so.
> I'd like to know if someone executed this at iTrade (Non- Registered Account) recently (2018 or 2019)
> ...


Never had to do a NG at iTrade but it is not automatic/seamless like it is at BMO IL and RBC DI. You need to do the purchase first on TSX, phone iTrade and get them to journal over to USD side and then re-sell on NYSE. You might need a margin account for that to do a 'same day' transaction but I don't know. Otherwise, you make the CAD purchase on TSX one day, wait for settlement T+2, phone the iTrade service desk to journal that day and then sell on NYSE. The problem is of course market movement in between the 2 transactions. 50/50 chance of market moving in your favour vs against you in the intervening period.

If you are a platinum iClub member and have access to a Relationship Manager, you might phone him first, explain what you want to do and then have him/her stay on the phone while you do the CAD purchase and then he/she can see it on his/her screen, move it over pre-settlement for you to sell on NYSE.


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## xcyber (Apr 29, 2019)

humble_pie said:


> why not query Knightsbridge?
> 
> currency exchange house often rec'd by cmffers. I for one know TD personnel who exchange larger amounts - the example i was given was $90k - at knightsbridge. Usually they obtain spot rates. They know how to gambit but for larger amounts they spare themselves the hassle.
> 
> other k'bridge advantages: no gambit technicalities, no worries of the kind the OP is fretting about above. Plus funds are immediately available after FXing.


Thanks. I checked their website and called them too. Will do it with them when I'm ready to exchange.

Thanks a lot. After seeing your post I remember seeing them on Dragon's Den sometime back where the guy got the deal but lost out on a premium for being too greedy!


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## timbuktwo (May 4, 2019)

Never did it with more than a few thousand bucks, but it's always been seamless and immediate. 

You have to buy DLR, which is a free tirade etf purchase. DLR gives you exposure to USD. Then you have to call itrade by phone and ask them to journal it over to DLR.U, which is same think but in usd. Then you sell it for a trade fee (for me $10). Then you have the cash in usd. It may not show up as cash until the trade settles. 

I've never experienced delays. The phone reps were competent and knowledgeable.


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## humble_pie (Jun 7, 2009)

AltaRed said:


> You need to do the purchase first on TSX, phone iTrade and get them to journal over to USD side and then re-sell on NYSE. You might need a margin account for that to do a 'same day' transaction but I don't know.
> 
> Otherwise, you make the CAD purchase on TSX one day, wait for settlement T+2, phone the iTrade service desk to journal that day and then sell on NYSE. The problem is of course market movement in between the 2 transactions. 50/50 chance of market moving in your favour vs against you in the intervening period.




with all due respect i believe the above suggestions are not sound & to protect other novice gambit traders who might read here, one would want to relay the following:

1) it is never advisable to first buy the securities in the currency the gambit trader is exiting. 

buying first in a non-DLR gambit will lock the gambit trader into a trap, since he still has to set up & carry out some kind of sell side trade in the currency he wishes to acquire. Buying first is one of the worser mistakes he could make.

since most brokers require a phone call to carry out the sell side, this delay automatically entrains the myriad of tiny glitches that can occur. Anything from phone-service-too-slow to licensed-representative-fails-to-understand to system crash.

what is advisable is to first set up both the buy side & the sell side of a gambit pair as detailed quotes. 

in addition, a successful gambit trader always wants to choose a carrier stock that is:

a) extremely liquid in both canadian & US markets (the high volume not only attracts the arbitrageurs who make the efficient market for a gambit trader, but volume also reduces the bid/ask gap on the sell side)

b) stock should be cruising quietly through an ultra-quiet non-volatile period, ie no looming earnings announcements, no news, dividend X dates or sector developments

c) stock should be a security that he does not already own, since to gambit some of one's own holdings will mean a capital gain or loss transaction (there are exceptions to this rule since in some cases a gambit trader might be deliberately seeking a loss or a gain)

on this hypothetical quiet morning, our gambit trader will prepare but not send his buy side order. Only then will he phone his broker to set up the sell side. Still not yet sending the buy order, he will make sure that the licensed representative understands the gambit trade that is about to happen. Ideally the licensed rep will immediately begin to prepare the sell order.

the gambit itself is a lightning-fast 2-step. Gambit trader releases his buy order, the licensed rep sees the buy side fill, the LR releases his sell order, done.


2) it should never happen that any gambit trader would first purchase his currency exit stock, then wait helplessly through 2 days of market fluctuation before selling into the opposite currency. Let's underscore that *never,* such a move would be suicidal. There are far too many better alternatives. Using the DLRs would be a much better alternative.


.


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## humble_pie (Jun 7, 2009)

timbuktwo said:


> Never did it with more than a few thousand bucks, but it's always been seamless and immediate.
> 
> You have to buy DLR, which is a free tirade etf purchase. DLR gives you exposure to USD. Then you have to call itrade by phone and ask them to journal it over to DLR.U, which is same think but in usd. Then you sell it for a trade fee (for me $10). Then you have the cash in usd. It may not show up as cash until the trade settles.
> 
> I've never experienced delays. The phone reps were competent and knowledgeable.




using the DLRs to move from CAD to USD is certainly an excellent idea for smaller gambits than the $200k that the OP contemplated here.

the hesitation with the DLRS for a larger gambit is that the quantity of shares required to gambit $200k may require a series of partial fills to achieve the full inventory at today's prices.

a gambit trader should specify a limit price here, since with a market order to buy 14,700 DLR shares he will be inviting highway robbery by the market maker.

for this reason, i for one would use a common share with both higher price plus far greater volume, for example RY. It would only take roughly 1900 RY shares to execute a $200k gambit, a standard-sized purchase that could be filled rapidly in one or at most 2 partial transactions.

it's worth noting that DLR gambits do not work particularly well in reverse, that is, they do not work efficiently when gambiting from USD to CAD. The reason is that only DLR.U is pegged. A party buying DLR.U & selling DLR 2 days later will be exposed to currency fluctuation during those 2 days, whereas the party buying DLR locks in his FX rate at that same moment of purchase.


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## AltaRed (Jun 8, 2009)

humble_pie said:


> with all due respect i believe the above suggestions are not sound & to protect other novice gambit traders who might read here, one would want to relay the following:
> 
> 1) it is never advisable to first buy the securities in the currency the gambit trader is exiting.
> 
> ...


Not much choice in a cash account. I cannot sell a stock I don't have. I have to buy it first....to then sell it on the other side. It is what I have always done.

P.S. I always buy a stock I am willing to keep for a period of time in case the market moves against me.


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