I'd like to buy in around if and when it reaches 99.00 or so beaver tails. What is the best way to invest in the US dollar? ING gives a poor exchange rate. Are there any GIC or bonds in us dollars? How to purchase?
that's a good post by Frugal on the comparative costs of CAD/USD exchange at various institutions. BTW in my experience the online discount brokers are charging about 1.90% for a one-way currency exchange, which is higher than the 1.50% rate you mentioned.
here's a little-known way to gain or collect the currency of your choice at absolutely zero cost. By selling the interlisted option for the underlying interlisted canadian stock, usually in the US market. In other words, one holds long canadians like bce or cn rail or banks or energy companies; and one sells their related call and put options on US options exchanges to gain US dollars with zero exchange costs.
another benefit, probably the bigger benefit, is that US options markets are far more efficient than the illiquid montreal exchange, so the trader's chances of obtaining a beneficial trade are vastly improved.
a related caveat is that, although generally speaking the margin position of such an account will not be impaired - because the broker will look at the aggregate margin position of both the canadian and the US accounts - nevertheless the broker will not be able to automatically marry the long and short sides if an assignment occurs. So an investor would have to monitor these split positions carefully.
although for many years canadian investors have benefited hugely from the currency relationship, by holding long canadian stock and selling short US options against it, nevertheless, now that the currencies are reversing their trajectories, the inverse relationship is not going to work well because we don't have efficient and liquid options markets in canada. To illustrate, it was a very good idea to buy biovail or thomson-reuters in canada and sell their call options in faster, more liquid US markets. And the US dollars from these options sales rose in value. However, in the inverse situation, one might buy bvf or tri in the US if one now expects USD to appreciate, but one will have difficulty selling their options easily in canada because of the illiquid nature of the montreal exchange, specifically the gigantic spreads posted by the dealers and their frozen stance with regard to market-making.
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