# Dual-listed stocks for gambit trades



## james4beach (Nov 15, 2012)

I started another ShoGam today. I used MFC (Manulife) for the first time. It seems very liquid both in US and Canada, one penny spread in each, and good for small gambits with the lower share price near $20. No problem with my odd lot order.

I converted about 7 K and the gambit still saved me about $130 in fees vs using TDDI's currency conversion.

So far I have used carrier stocks RY, TD, BNS, MFC. I might also use SU in the future. What other carriers do people use?


----------



## james4beach (Nov 15, 2012)

What carrier stocks do people use for currency gambit trades? Assuming we're talking about traditional gambits, not the DLR/DLR.U method. It's good to have a list of them to use, since you want to avoid stocks you already have positions in, and will try to align the trade size to the amount of cash you're converting. I consider various things:

- want board lot (100 share multiple) orders for best fills and best efficiency
- need high liquidity and $0.01 bid/ask spreads
- higher share prices are better since $0.01 spread is smaller % of total
- want low volatility, a stock that isn't moving much on the gambit day

Here are some dual listed stocks I use for gambits, with high share prices:

RY
TD
CM
CNR/CNI

I don't like the other big bank stocks since US liquidity isn't great (BNS is border-line). Any others that you use?


----------



## humble_pie (Jun 7, 2009)

james4beach said:


> I started another ShoGam today. I used MFC (Manulife) for the first time. It seems very liquid both in US and Canada, one penny spread in each, and good for small gambits with the lower share price near $20. No problem with my odd lot order.
> 
> I converted about 7 K and the gambit still saved me about $130 in fees vs using TDDI's currency conversion.
> 
> So far I have used carrier stocks RY, TD, BNS, MFC. I might also use SU in the future. What other carriers do people use?




i used MFC once. For the reasons you mention above. It's less expensive than the banks, therefore easier to calibrate down to the dollar (i wouldn't be one to try an odd lot when gambitting though)

elsewhere you're asking for more gambit carrier suggestions but i'm wondering why? to my way of thinking it's more efficient to only have one or at the most 2 candidates. One can get to know them, their quirks, habits, earnings announement dates, etc. This knowledge is helpful.

it's my understanding that folks who don't have USD paycheques or a USD business only need to gambit every little once in a while. Once a reasonable inventory of US investments has built up, their dividends will continue to swell the USD account all by themselves.


----------



## My Own Advisor (Sep 24, 2012)

I prefer to use stocks that also pay dividends in USD. BEP.UN and BIP.UN are two.


----------



## humble_pie (Jun 7, 2009)

My Own Advisor said:


> I prefer to use stocks that also pay dividends in USD. BEP.UN and BIP.UN are two.




i hesitate to intervene here but this is at least the 2nd or 3rd time that MOA has posted how wonderful are brookfield's BEP & BIP for gambit trading, when in fact nothing could be further from the truth imho.

currency arbitrage - which is what gambit trading is - is a tricky concept for a newcomer to master. There's no room for mistakes, everything has to be correct from the getgo.

so it's for the novice gambit trader that i'll post - one more time - that illiquid stocks like BEP dot UN & BIP dot UN are to be avoided like the plague. Do not use these stocks unless you hold them already & have some sort of misguided fancy for trying to day trade them.

what the gambit trader needs as a gambit carrier stock is a big multinational with high volume in toronto & at least moderate volume on new york markets. He needs tight spreads in both markets. Your gambit trader needs to be able to snap up his quantity in toronto or new york at a fair price & then, quick as a wink, he needs to be able to sell that same quantity on new york or toronto, again at a fair price.

liquid interlisted stocks like royal bank or MFC, which is jas4's latest pick, present the optimal conditions & the best opportunities for currency arbitrage.


lastly, there is a reference to BEP's & BIP's USD dividend, but this is a horse of a different colour. Currency of dividend has nothing to do with potential success in arbitrage trading. An interlisted canadian company could pay no dividend whatsoever; or it could pay its dividend in little slices of green cheese from the moon; but as long as its public market trading patterns in both toronto & new york showed good liquidity with tight bid/ask spreads, this company would be a first-rate gambit candidate.


----------



## tygrus (Mar 13, 2012)

Enbridge
Transcanada


----------



## james4beach (Nov 15, 2012)

Thanks, ENB and TRP look suitable.

I agree with humble_pie and the stocks must be liquid. Maybe MoA is thinking of a different kind of operation?


----------



## james4beach (Nov 15, 2012)

I think MFC is fine but also I noticed the downside of the low share price. Just a one cent shift is significant as % of total.

The reason I was looking for a long list of carriers is then I can match up the amount of money to convert against which one gives the right number in board lots.


----------



## tygrus (Mar 13, 2012)

James, the bots and algos were designed for this very purpose. Do you really think you can beat them at their own HFT game? Trying to expose a gap that closes in mere minutes, maybe less. This is dangerous IMHO.


----------



## james4beach (Nov 15, 2012)

I'm not talking about exploiting a gap, but rather about trying to get as close as possible to ideal conversion. Assuming even a stationary stock that is perfectly priced cross-border, you lose on the bid/ask spread. Imagine two different gambit carrier stocks:

AAA has 9.99 bid, 10.00 ask
ZZZ has 99.99 bid, 100.00 ask

In a gambit operation you are hitting the bid at one side and ask on the other. It's an inevitable loss during the gambit. With AAA, the slippage (loss) is 0.01/10 = 0.10% but with ZZZ, the slippage is 0.01/100 = 0.01%

That's a big difference in a gambit, 10 basis point inefficiency with AAA but only 1 basis point inefficiency with ZZZ. This is why higher share price carriers are better.

Maybe I'm splitting hairs here, but I've been able to do gambits for as cheap as overall fees of 7 basis points. That means that say a 10 basis point slippage using AAA is unacceptable. Once we're down to these ultra low forex fees, it matters how many basis points slippage comes from bid/ask spread. The best carrier is highly liquid, one cent bid/ask spreads, and high share price.


----------



## leoc2 (Dec 28, 2010)

Here is a dual listed stocks spreadsheet I discovered on another forum.
https://docs.google.com/spreadsheets/d/13rtd-1RBvIK992fnwPczwBnywB4aAiXEUvgHAz8--wA/edit#gid=0


----------



## james4beach (Nov 15, 2012)

Thanks for the link, that's interesting. If you limit it to stocks that have more than 1M daily volume on both sides of the border, and then eliminate miners (too volatile for gambits) you get this list:

BB
BAM.A
CM
CNQ
CNR
ENB
ECA
MG
MFC
POT
RY
SU
TD
TRP

(I added CNR because my calculation of recent volume shows it averages above 1M shares daily in the US)


----------



## humble_pie (Jun 7, 2009)

jas4 why are there 2 almost identical threads going on this topic?

i'm wondering, do you think you might be able to ask the moderator to combine them? he seems like a good guy, very organized & logical


----------



## james4beach (Nov 15, 2012)

Good idea, I merged the threads to discuss this choice of carrier stock. I left the the old ShoGam thread alone (focused on the short-first procedure).


----------



## humble_pie (Jun 7, 2009)

james4beach said:


> Thanks for the link, that's interesting. If you limit it to stocks that have more than 1M daily volume on both sides of the border, and then eliminate miners (too volatile for gambits) you get this list:
> 
> BB
> BAM.A
> ...




BAM/BAM.A is regularly doing a million shares on both sides of the border? 

gosh who knew. I have bam shares, the liquidity is so low that the options are pitiful in both countries. 

i'd leave out CNR because individual shares are too expensive, it might be too difficult to gambit a specific dollar amount without doing an odd lot.

are we really getting those penny spreads in both countries in commerce bank, enbridge & magna though. what about blackberry, is it really cutting the biscuit.

sigh. When all is said & done we likely end up with the true & trusty big green, the true & trusty roybank, often an mfc or a trp or a cnq, that's about it.


----------



## james4beach (Nov 15, 2012)

humble_pie said:


> BAM/BAM.A is regularly doing a million shares on both sides of the border?


You're right, it doesn't. There must have been a problem in that external spreadsheet.

Average volume on BAM currently runs only 800K ish in the US. Thanks for the reminder on that and it probably should be striked from the list.


----------



## humble_pie (Jun 7, 2009)

stricken

one could also say struck

there are english verbs with irregular passé composé tenses, as "strike" or "wake." eg the besieged city was stricken with cholera, the sleeping beauty has woken up.

but like the subjunctive, these beautiful tenses are disappearing from contemporary english


----------



## My Own Advisor (Sep 24, 2012)

james4beach said:


> Thanks, ENB and TRP look suitable.
> 
> I agree with humble_pie and the stocks must be liquid. Maybe MoA is thinking of a different kind of operation?


Sorry, yes, was thinking of something else when I wrote my response! To clarify, I use big bank stocks. RY is a good one.


----------



## leoc2 (Dec 28, 2010)

leoc2 said:


> Here is a dual listed stocks spreadsheet I discovered on another forum.
> https://docs.google.com/spreadsheets/d/13rtd-1RBvIK992fnwPczwBnywB4aAiXEUvgHAz8--wA/edit#gid=0


Use the above spreadsheet and sort column G or H to find the most desirable conversion rate. Keep in mind there is a 20 minute delay on the stock quotes.


----------



## humble_pie (Jun 7, 2009)

leoc2 said:


> Use the above spreadsheet and sort column G or H to find the most desirable conversion rate. Keep in mind there is a 20 minute delay on the stock quotes.




even a one-minute delay in an arbitrage operation is lethal

is why things always boil down to the tried & true. the big green. the big navy blue. maybe 3-4 other stocks.


----------



## james4beach (Nov 15, 2012)

Yes I'm warming up to this idea of sticking to some tried & true regulars. TD and RY have always treated me well on gambits.


----------

