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Discussion Starter · #1 ·
I'm curious about using a high volume stock like RY to do the gambit.

It seems like you take 2 risks for the duration of the gambit. 1, that the currency fluctuates against you. 2. that RY itself goes down between buying and selling. Risk 1 is probably generic to all currency exchange and nearly impossible to predict (maybe one can average it out). But Risk 2 seems worrisome. It seems to me that part of this is not being silly about when you do it (e.g. before earnings announcements) but maybe the average daily fluctuations are small enough to make this feasible. Anyone care to comment?

A lot of this depends on how long the process of journalling and selling takes at the broker, I guess. (Speaking of which: has anyone done this at Schwab Global?)

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I'm curious about using a high volume stock like RY to do the gambit.

It seems like you take 2 risks for the duration of the gambit. 1, that the currency fluctuates against you. 2. that RY itself goes down between buying and selling. Risk 1 is probably generic to all currency exchange and nearly impossible to predict (maybe one can average it out). But Risk 2 seems worrisome. It seems to me that part of this is not being silly about when you do it (e.g. before earnings announcements) but maybe the average daily fluctuations are small enough to make this feasible. Anyone care to comment?

A lot of this depends on how long the process of journalling and selling takes at the broker, I guess. (Speaking of which: has anyone done this at Schwab Global?)

we know nothing about Schwab, never seen it mentioned on here

as for RY it's an excellent carrier stock, one of the most popular. Just make sure you don't already own it (if you do, gambit trading will trigger a gain or a loss.)

as for your 2 risks, they are inconsequential if you do a stock gambit properly. The sell side has to be done immediately. Cannot wait for the broker to slowly journal across 3 days, etc.

at all brokers except for BMO & royal bank, an instant gambit sell can only be done by phoning the broker. This phone call, in turn, usually triggers an agent-handled fee. There are a few workarounds.

one workaround is to use the DLRs if moving from CAD to USD. DLR.U is pegged, therefore days can comfortably pass while journalling occurs, because the proceeds are already locked in.

the DLRs don't work so well when moving from USD to CAD though, because only DLR.U is pegged. Client moving from USD to CAD in DLRs will be exposed to currency fluctuation for howsoever many days it takes to complete the journal.

another workaround is to simply pay the agent-handled commission. On amounts north of $20k it will be far less than the broker FX fee for the exchange.

if phoning for the sell side, here is a hint. Do not buy first. Instead, line up the buy side order. Phone & make sure the broker understands what you are doing. Establish the commission. While you are sending the buy order, broker should be preparing the sell order. As soon as he sees the buy is filled, he will release the sell order. Everything will be accomplished within 5 seconds. There will be no time for more than a few pennies worth of fluctuation.

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Discussion Starter · #3 ·
Thanks! I'm a US resident hence the Schwab question. Good point about not holding the stock already, too, I hadn't realized that.

bonus points for using "howsoever" in a sentence.
 

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Thanks! I'm a US resident hence the Schwab question.


if you try it on Schwab USA & it works, please let us know

there's another, trickier strategy to have up your sleeve. Short the stock in the desired go-to currency first, then buy to cover in the exit currency.

you will probably have to phone or personally ask for the broker to move the shares diagonally across the currencies to cover the short position. However you will have the luxury of 2 low-cost online trades plus the luxury of not having to rush to cover the short, as long as your margin is holding up.

be careful not to run through a dividend X date period though. You know the rule, it goes that shorts have to pay the dividend.

here is a cmffer who successfully does short gambits. He didn't invent the strategy - short gambits are actually an old idea, but they've been sort of suppressed by brokers because they do entrain certain specific problems for brokers - but he baptized the short-first approach with its very own name, the ShoGam.

http://canadianmoneyforum.com/showthread.php/64970-ShoGam-short-first-gambit

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I use those ShoGams but I agree it's not the best way to gambit.

I have a Schwab US account too, but it doesn't give me access to Canadian stocks so I won't be able to try gambits there.
 
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