Hello, I’m Justin Bender, Portfolio Manager at PWL Capital in Toronto, and today I’ll
be showing you how to cheaply convert your Canadian dollars to US dollars at TD Direct
Investing, using a strategy called Norbert’s gambit.
For this tutorial, I’ll be exchanging about 6,000 Canadian dollars for US dollars in my
RRSP account.
Before getting started, please ensure that you have a US dollar RRSP account already
set-up.
If you only see a Canadian dollar account, call TD Direct Investing at 1-800-465-5463
and ask them to open one for you.
When you’re ready to get started, click on the ‘Buy/Sell’ icon at the top of the screen
For our first step, we’ll enter ‘DLR’ in the ‘Symbol’ field.
DLR is the Horizons US Dollar Currency ETF.
The fund invests in US dollar cash equivalents, but can be purchased with Canadian dollars.
When the fund name appears, click on it to generate a quote to the right.
We can then select ‘Buy’ as our ‘Action’.
To calculate the number of shares that we need to purchase, we’ll use our computer’s
calculator:
Taking our Canadian dollar cash of $6,000 and subtracting the $9.99 trading commission
gives us about $5,990.
We’ll then divide this value by DLR’s current ask price of $13.27, which equals
451 shares – we can then go ahead and enter 451 in the ‘Quantity’ field.
We’ll select ‘Limit’ as our ‘Price’, and enter the quoted ask price, which is $13.27.
After you’ve selected the ‘Remember password for this session’ check-box and entered
your trading password, you can click on ‘Preview Order’.
When you’re ready to confirm the order, click on ‘Send Order’.
And to check the status of the trade, click on ‘Go to Order Status’ – here you’ll
note that the trade has been filled.
Before moving to our second step, we’ll need to wait until our initial trade settles,
which is three business days after we placed the trade.
As we placed the initial trade on January 20th, 2017, we will need to wait until the
trade settles on January 25th, 2017.
Please note that the investment industry is scheduled to implement a T+2 settlement cycle,
beginning September 5th, 2017 (so you will soon be able to complete the gambit in one
less business day).
For our second step, we’ll call TD Direct Investing at 1-800-465-5463 and ask them to
transfer 451 shares of DLR from the Canadian dollar RRSP account to the US dollar RRSP
account.
When the transfer has been completed, your 451 shares of DLR will now be showing in the
US dollar RRSP account (this generally occurs by the end of the day or the next business
day).
For our final step, we will be selling 451 shares of DLR.U. DLR.U is the exact same security
as DLR.
The only difference is that DLR.U is transacted in US dollars, while DLR is transacted in
Canadian dollars.
Click on the ‘Buy/Sell’ icon at the top of the screen, and then enter ‘DLR.U’
in the ‘Symbol’ field.
When the fund name appears, click on it to generate a quote to the right.
We can then select ‘Sell’ as our ‘Action’.
We can also enter 451 in the ‘Quantity’ field, as we will be selling the same amount
of shares that we originally purchased.
We’ll select ‘Limit’ as our ‘Price’, and then enter the quoted bid price, which
is $9.94.
After you’ve selected the ‘Remember password for this session’ check-box and entered
your trading password, you can click on ‘Preview Order’.
When you’re ready to confirm the order, click on ‘Send Order’.
And to check the status of the trade, click on ‘Go to Order Status’ – you’ll note
that the trade has now been filled.
When you refresh the screen, you’ll find that your 6,000 Canadian dollars have now
been converted into about 4,500 US dollars.
You are now free to purchase US-listed ETFs with cash available in your US dollar RRSP
account.
If you have any questions, please feel free to send them to me by email: jbender@pwlcapital.com