# Norbert's gambit at BMO investorline



## off.by.10 (Mar 16, 2014)

I want to share my recent experience performing Norbert's gambit at BMO investorline. The transaction itself (TD) went fairly smoothly, although I ended up a few US dollars in the red. I'm not certain if that was my fault for reading the wrong numbers or if part of the comission (like the extra SEC fees) were missing from the transaction estimate. Not a big deal in any case, a few $ get converted automatically after a few days if you don't do it yourself to even things out.

The account was messed up for a few days after the settlement date, which I had read to expect. Then it cleared up and I left it alone for a while.

I checked a week later and was surprised to find that my account was again stuck with a negative balance. I found that the day after both sides of the trade cancelled each other, I was charged interest for, I suspect, the TD shares the system thought I had borrowed on the US side of the account for a few days. At 22%, it was 0.2% of the trade. I called and after a short chat was told that's an error and it would be credited.

So, bottom line, watch your account for a while after the trade is done. I found older references for this problem online so it's not new but neither does it happen all the time from what I've read around here. Feel free to add your own experiences to the thread, we don't seem to have a lot of information on the topic.

Edit: At humble_pie's suggestion, I'll add that this was inside an RRSP account.


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## humble_pie (Jun 7, 2009)

^^


interesting, thankx for sharing. It's always great to add to the accumulation of knowledge.

might you be able to mention whether the account used for the gambit transaction was a cash, a margin or a registered account? subtle differences in the system for different types of account might account for what look like random interest charges being applied now & then.

i've only ever gambit traded in a margin account at BMO. No interest charges.

.


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## off.by.10 (Mar 16, 2014)

Made another similar gambit trade last week. Timeline went like this:
Monday (T+0) : Gambit trade. Account looks beyond weird (negative balance).
T+1 : Account looks ok, showing both sides of the trade.
T+2 : Settlement date. No visible changes.
T+3 : The share balances cancel each other, according to transaction history. Account looks normal again, with no trace of the gambit trade.

No interest charges so far. Looks like trading on a monday might have helped. Last time, the settlement date was a friday which means the gambit shares were not cleaned up until monday. Of course, had I waited this week, I would have gotten nearly 1% more :chargrined: Does not matter much in the long run though.

I think I also figured out how I ended up in the red last time: BMO's account balance does not include trading fees for the day.


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## humble_pie (Jun 7, 2009)

off.by.10 said:


> Of course, had I waited this week, I would have gotten nearly 1% more :chargrined:




not really possible, the 2 prices in the 2 separate markets will always float together

if you think you could have sold for a higher price a week later, then you would have paid more to buy on that same day


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## off.by.10 (Mar 16, 2014)

humble_pie said:


> not really possible, the 2 prices in the 2 separate markets will always float together


I meant the exchange rate. It was 1% better a week later. Of course trying to time FX is probably worse than trying to time the stock market. There seems to be a lot of volatility recently.


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## off.by.10 (Mar 16, 2014)

Reporting on another RRSP gambit trade. Traded on Monday again and did not have the interest charge problem. No need to call anywhere. One small thing I noticed: although the gambit shares are recorded as being transferred out on T+3, I could only actually see that in my account on T+4 (Friday morning).

BMO still isn't taking the current day's fees into account when calculating the account balance.


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## off.by.10 (Mar 16, 2014)

I apparently posted too quickly. The sneaky interest charge popped up later, dated as having happened on Monday (a day before my post and a full week after the trade). Looks to be about one day's worth. So trading on Monday is no help.


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## leoc2 (Dec 28, 2010)

off.by.10 said:


> I apparently posted too quickly. The sneaky interest charge popped up later, dated as having happened on Monday (a day before my post and a full week after the trade). Looks to be about one day's worth. So trading on Monday is no help.


Call and ask to remove the interest charge. That is what I did!


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## off.by.10 (Mar 16, 2014)

leoc2 said:


> Call and ask to remove the interest charge. That is what I did!


Yes I did that too the previous time. Quite painless, just a 2-3 minute wait while the person at the other end gets things done. Would be better if the system got it right in the first place though.


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## BigMFfan (Feb 23, 2013)

off.by.10 said:


> Yes I did that too the previous time. Quite painless, just a 2-3 minute wait while the person at the other end gets things done. Would be better if the system got it right in the first place though.


This is what I had to do almost every single time when I did a Norbert's gambit in my BMOIL account. The last time (about 4 months ago), the customer service person said the only way to avoid the interest charge completely is to call them the same day as you make the trade and ask them to transfer the stock between the two sides of your account right away. An internal email will not suffice, as it is rarely addressed the same day as it is sent. If one side of your account is in a negative position for even one day (I think at approx. $8300 or more) you will be charged interest automatically by their system.


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## off.by.10 (Mar 16, 2014)

BigMFfan said:


> The last time (about 4 months ago), the customer service person said the only way to avoid the interest charge completely is to call them the same day as you make the trade and ask them to transfer the stock between the two sides of your account right away. An internal email will not suffice, as it is rarely addressed the same day as it is sent.


Thanks, that's good to know. I'll set up a reminder next time to make sure not to forget to call.


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## humble_pie (Jun 7, 2009)

i believe interest charges would only appear when there would be insufficient margin in the go-to currency account to support the new gambit short position for its T+2 life

in a cash account that might mean insufficient cash to support the gambit short 

it's good to know a simple phone call to journal the shares will avoid interest charges.

btw it's perhaps not widely known but bmo does distinguish between the 2 currency "sides" of its universal mono-accounts. 

some BMO clients might benefit by double-checking what currency their dividends are being paid in. To do this, sort positions by "settlement currency." If a holding turns up in the wrong currency, BMO agents will gladly take a phone call to get it journalled to the proper side.


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