# Norbert's Gambit Calculator



## vi123 (Oct 29, 2015)

I have been using Norbert's Gambit a lot recently. I have a small spreadsheet that I created to calculate the savings and effective exchange rate.

It has saved me so much money that I thought I'd put together a website to help people with the same calculations. 

So here you go. A gift from me to you 

http://norbertsgambit.com/

The calculator picks up the current prices for DLR and DLR.U (as per Yahoo finance, with a 30 minute delay). You can update those prices, along with the amount that you want to convert and the trading commission that you're paying. There is another tab for USD-to-CAD conversions.

Take a look and let me know if you have any suggestions!


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## vi123 (Oct 29, 2015)

Note: Use the calculator *during trading hours* to get the most accurate estimate of how much Norbert's Gambit will save you. 

For example, the calculator is currently picking up Yahoo's DLR quote as 13.68-13.79. During trading hours this will typically be something like 13.72-13.74, i.e. a much tighter spread.


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## humble_pie (Jun 7, 2009)

it's dazzling. It's wonderful. The website.

butbutbutbut. There are some serious omissions, some are even (unintentionally) misleading. Below is just one, or rather one-and-a-half, omissions. If you like i could come back with the others. Over time. Gambit trading is actually a small book with several detailed chapters. Or a website about 4 times the size of the one you have so beautifully inaugurated.

1) it should be noted that DLR gambiting does not work when proceeding from DLR.U to DLR. This is because only DLR. U is pegged. The party transitioning from USD to CAD via the DLRs could be hung up for as long as 3 or 4 days while his DLR.U purchase settles & journals.

during those 3 or 4 days, this party will be exposed to currency fluctuation.

solution: the party transitioning from DLR.U to DLR should phone his broker for an instant sell. A substantial commission may be charged. At only 2 brokers out of the entire canadian lot - BMO & royal bank - can the gambit trader sell online, immediately, for a cheap online trade commission.

1.5) next item: since the DLR.U/DLR trader exchanging USD into CAD is either going to have to phone & possibly pay a higher commission, or else he is going to have to open a backup account at BMO or roybank, why would this trader bother to use the DLRs in the first place?

the DLRs were invented after the current vogue in gambit trading was launched in 2010. They were invented by horizons betaPro expressly for all the brokers who had forced gambit delays of 3 days or more, while original purchases awaited settlement date.

somehow an urban myth spread that the DLRs *have* to be used for gambit trading, but nothing could be further from the truth. The drawbacks of DLRS are: they cannot be used for USD --> CAD; a spread is built into each DLR; there is also a low HbP management fee; the DLRs are less liquid than actual interlisted carrier stocks such as RY or TD.

bref, interlisted stocks are faster, cheaper & better. 

for these reasons, may i say that a website teaching *only* how to trade the DLRs - & in reality only effective for CAD to USD transitions - cannot claim to be an integrated gambit website.

at least, not yet. Over time, such a website could be augmented & expanded to treat the whole picture. What we have here is a promising startup by an obviously talented web master.


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## RParks (Sep 25, 2012)

vi123 said:


> I have been using Norbert's Gambit a lot recently. I have a small spreadsheet that I created to calculate the savings and effective exchange rate.
> 
> It has saved me so much money that I thought I'd put together a website to help people with the same calculations.
> 
> ...


What platform are you using? Anyone know if you can still do a gambit with TD Waterhouse?


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## vi123 (Oct 29, 2015)

The exact procedure for the Gambit is different depending on which platform you use. That's why I use RBC Direct, which makes it very easy and safe to do in both directions.

I created the tool to give people an idea of the amount of money they can save by using it. To actually complete the transaction with whichever broker you're using, you would obviously need to do some further investigation. By quantifying the money that can be saved, hopefully this will give more people the confidence to try it.

@humble_pie: Thanks for the feedback. All very valid points. If you want to do the gambit with RY or another similar stock, you can certainly use the calculator for that too. Just use the bid/ask prices for RY instead of the DLR prices. This calculator is meant to be more for beginners so I decided to keep it simple.


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## RParks (Sep 25, 2012)

RParks said:


> What platform are you using? Anyone know if you can still do a gambit with TD Waterhouse?


Never mind, I see the thread below on TD.


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## james4beach (Nov 15, 2012)

Regarding TD Direct Investing:

DLR can be used to convert from USD to CAD, but it's not instant and you have currency exposure for the days you'll have to wait. See this old thread.

So it's true that you can't convert at an immediate rate. However it still accomplishes the job, if you're willing to wait. Forex movements are unpredictable anyway so you're no more or less worse off by waiting for settlement.

But especially in the reverse direction, I agree that DLR is definitely inferior to an instant gambit using a carrier stock.

humble_pie has pointed out that _some TD reps_ will do the instant gambit for you, at web commissions. But not all reps cooperate. Some do it, others don't. I'm still struggling with this.


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## jerryhung (Mar 28, 2011)

vi123 said:


> I have been using Norbert's Gambit a lot recently. I have a small spreadsheet that I created to calculate the savings and effective exchange rate.
> 
> It has saved me so much money that I thought I'd put together a website to help people with the same calculations.
> 
> ...


Thank you for the website
I'll convert USD->CAD soon

and came across MDJ post
http://www.milliondollarjourney.com...ad-foreign-exchange-using-norberts-gambit.htm

I agree on the DLR.U/DLR part, but honestly it's all the same
If one converts DLR -> DLR.U = one locks in the CAD-to-USD rate when buying DLR already, no more fluctuations, period

If one does DLR.U -> DLR = one has no lock-in FX rate, but it'll be basically the same as holding USD $ also, which is always valued at the latest FX rate (could be higher or lower)
e.g. if I buy DLR.U today (12/15) in US Margin, call to journal with TDDI, 3 days later (12/18) I'll have DLR in my CAD Margin, and I can CHOOSE to sell whenever I want .... 
Heck, if USDCAD increases later, I actually come out ahead  I can afford to do it since most predict CAD to go lower, and we're already at 11 year lows anyway...


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## P_I (Dec 2, 2011)

jerryhung said:


> and came across MDJ post
> http://www.milliondollarjourney.com...ad-foreign-exchange-using-norberts-gambit.htm


For the history buffs in the crowd, the original source Norbert's gambit - Can$ to US$ or vice versa - Financial Wisdom Forum. Note the ID of the poster.


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## bleagues (Sep 24, 2013)

Hi all,

I've been reading up on doing a USD to CDN Gambit, being a member here at CMF now for a while I believe the contributors to this thread to be knowledgeable in this subject and I would like to pick your brains.

I have done the reverse (CDN to USD), at Questrade, by buying DLR then journaling the shares over DLR.U and selling with no issues.

This time it is reverse and would like to lessen the currency risk. Would it be a better option to buy one of the big interlisted banks instead of DLR.U?

Another concern is the amount of shares typically traded by DLR.U/DLR. The sum I am going to be converting is not what I would believe to be typical and am concerned about the volume levels of this interlisted etf.

Because of the amount, would I be better off going to a FX company instead of doing a Gambit?

Thanks in advance.


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## bleagues (Sep 24, 2013)

As a further to my most recent post here, I think I found my answers here:

http://canadianmoneyforum.com/showthread.php/37377-Good-ETFs-to-use-for-Norbit-s-Gambit-List-them-here


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## NorthernRaven (Aug 4, 2010)

I did a rudimentary little web-based calculator for gambits a few years back, mainly for myself when I was interested in them, just to get a sense of the numbers. A few comments based on my experience:


The page should note (as you do here) that the Yahoo DLR/DLR.U quote are delayed (I thought it was 15 minutes, rather than the 30 you mention). This is especially problematic in that I believe that Yahoo's _currency_ quotes are actually _live_, which makes for certain difficulties in calculating results. The DLR trade itself is internally consistent, but when you express it as an "effective exchange rate" it is a stale rate, not the CAD/USD rates pulled from Yahoo and shown on the right of the page. 

Express in terms of "spread" - the most useful way of comparing the cost of various methods of doing exchange is showing their spread - reading raw exchange fractions isn't intuitive! Of course, the fact that Yahoo's DLR and currency prices are from different times makes this a bit of a problem... 

Be careful with expressions of "amount saved". You have an asterisk which shows that this is compared against "_the typical rate of 1.5% charged to retail customers_". I assume you mean retail _brokerage_ customers, since retail banking spreads will likely be more like 2-2.5%. But at least in my experience with TD Waterhouse (now TDDI), their conversion rate "steps" down with larger amounts. $15K seemed to save about 15 basis points, and from $35K to around $60-70K had a rate around 0.85%. Any "amount saved" should really do some sort of adjustment based on the amount entered - I assume most brokerage FX works similarly.

Really emphasize that "outside trading hours" factor. Whatever "ask" price gets returned after hours must be some sort of safety price that will be significantly worse that anything that would be posted during trading hours, and skews the results. It would probably be better to use the last closing prices, or just some sort of canned artificial values to show the relative savings.

As humble_pie and others note, going from DLR.U -> DLR (USD->CAD) is conceptually quite different from the reverse. Buying DLR.U is really just converting your USD to a slightly fuzzier form, and requesting a conversion 3 business days in the future. You are assuming a currency risk during that time, and while you might actually come out ahead, the USDCAD pair is certainly volatile enough that it may wipe out all your "savings". This is why the spread being compared against is so important - someone repatriating $10K might have 100 basis points to play with over what their brokerage would do it for, but someone with $50K might only have a 50 basis point difference, which could easily be overwhelmed by a bad week for the loonies!


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## humble_pie (Jun 7, 2009)

bleagues said:


> I have done the reverse (CDN to USD), at Questrade, by buying DLR then journaling the shares over DLR.U and selling with no issues.
> 
> This time it is reverse and would like to lessen the currency risk. Would it be a better option to buy one of the big interlisted banks instead of DLR.U?
> 
> ...



what good questions. Here are a few comments.

1) re currency fluctuation risk for a buyer of DLR.U: it's true this risk exists, as Northern Raven explains.

2) re using an interlisted bank stock as a carrier stock: buying a canadian bank stock on new york market & waiting 3 days to journal it is too risky for my taste, especially since you mention you will be tying up a large sum of money.

choosing a bank stock or any other liquid interlisted stock as a gambit carrier means 2 fast near-instant online trades. In your case, buy on new york, sell on toronto a few seconds later.

at questrade, selling means getting a licensed representative to handle the sell order. There would likely be a higher agent-handled commission. However, this would still be considerably less than the standard broker FX rate, which hovers presently under 2%.

if considering to pay a broker-handled commission for the sell side, choose an expensive stock such as RY or BMO, so that there will be as few shares as possible, in order to keep the commish as low as possible. Remember, too, that there is always the possibility that the questrade representative you reach by phone will agree to do the sell side at web commish, so don't forget to request this!

in general, questrade imho is one of the more difficult brokers for gambit trading. DLR to DLR.U does work well at questrade, but other variations of the gambit strategy seem to be a bit fraught chez questrade.

3) re an outside currency exchange house: about a year ago, a lady arrived in cmf forum who wanted to exchange roughly $500,000 from CAD to USD. She didn't have a broker account, had no online trading experience, so attempting to teach her a complex strategy such as an online currency gambit was not an option.

she went to exchange house Knightsbridge & returned to the forum after her transaction was completed to post how pleased she was with Knightsbridge. She said she had obtained an excellent FX rate, only a few basis points above spot, & the Knightsbridge operator had offered her several additional service options at no charge.

evidently Knightsbridge is using BMO's treasury floor but adding service options for retail clients that the big bank's treasury operations are unable or unwilling to offer in retail quantities.

4) re: threshholds: i feel that one can comfortably gambit $100-$200-$250k at a broker. After all, those amounts represent up to 3000 shares of RY, a single-order quantity that, most days, can easily be accommodated on the NY exchange.

but higher than that, i would certainly compare the broker commission with what Knightsbridge could offer. Even at $100-200k, i'd compare.


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## bleagues (Sep 24, 2013)

Humble Pie, Northern Raven thanks for your thoughts. They were greatly appreciated.

For those wondering, and for other users future reference, the amount of USD converted was aprox. $250,000.

I asked Royal Bank (where the cash was originally sitting) for their best rate and was not impressed by their offered rate and told them they had to do better. They said their offer was the best they could do. A side note, I only use Royal for their US banking services and am not a big client to them. Just cash in cash out.

I ended up calling Questrade and asked them for a better rate than the one posted for the amount I was transferring. They offered me the days rate at time of calling less 100 basis points for their fee.

I refused this. They then asked me what I was looking for and I told them 50 basis points less than the rate at time of calling. They agreed, as a one time transaction.

I concluded this was an acceptable offer considering the 3 day wait to journal a Gambit and the currency risk involved. Or waiting to transfer the money to Knightsbridge and then hoping the dollar didn't fluctuate.

The difference between what RY was offering and the one QT ended up giving me did save me approximately $4500.

Thanks once again.


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## NorthernRaven (Aug 4, 2010)

bleagues said:


> Humble Pie, Northern Raven thanks for your thoughts. They were greatly appreciated.
> 
> I refused this. They then asked me what I was looking for and I told them 50 basis points less than the rate at time of calling. They agreed, as a one time transaction.
> 
> I concluded this was an acceptable offer considering the 3 day wait to journal a Gambit and the currency risk involved. Or waiting to transfer the money to Knightsbridge and then hoping the dollar didn't fluctuate.


I hadn't realized this was a revived thread from last December - I can't remember if I didn't see that website or forgot about it.

It would have been interesting to get a quote on 250K from Knightsbridge. I've never used them (and I haven't done any gambitting since I initially funded by USD needs a few years back), but the 500K lady got something ridiculously good like 5 basis points, and I think they would have been well under 50 basis points. I'm not sure, but depending on how they work they may also have been able to lock you in a rate once you committed to the transaction, and then let the e-transfer in to them take whatever time it might after that. 

TD Waterhouse's (TDDI) system used to effectively quote 30 basis points for over 100K, although I don't know if that is still available.


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## humble_pie (Jun 7, 2009)

^^


what a wonderful story. It shows how you had a good grip on the spot rate at the time you made your phone calls. It shows how, when you were dealing with questrade, you had a first-rate idea about the kind of rate they should be showing you, if they would only put their minds to it. Mille félicitations. 

another interesting part of this story is that it shows how flimsy the whole 2%-&-up FX fee structure is. It shows how outrageous broker & bank FX fees can be. 

it's true you had a worthwhile amount to exchange, so you could enter into a negotiation. Most of the time, with dividends & small capital exchanges such as $20-50k to buy stocks in the opposite currency, we cannot negotiate anything. So we have to learn to jack-be-nimble & to jump over the candlestick via gambit trading.


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