[james4beach]

ShoGam, the short-first gambit strategy, is discussed in this post and this post. I'm doing it at TDDI.

Trying my last reverse gambit of the year! Loving this spike in the USD/CAD this morning, FX market at trade time is 1.3916

Short 200 RY in Canadian margin short account at 75.43, proceeds: $15,076.01 CAD
(Wait for trade to fill, then)
Buy 200 RY in US margin account at 54.206, cost: $10,851.19 USD
Achieved exchange rate 15,076.01/10,851.19 = 1.3893
Total fees or "forex fees" therefore amount to 0.17%

Trades settle January 5, at which time I'll phone and ask them to journal the shares.

 

[GoldStone]

Don't transfer CAD proceeds to another account before settlement. Or you will be hit with margin fees.

It's an easy mistake to make. Been there, done that.

 

[GoldStone]

.... and don't purchase HISA funds before T+2. Can't buy them on T or T+1 because they settle the next day.

 

[james4beach]

Thanks. I was wondering about this. Going into today, I had overall margin of around 40K between accounts but $0 cash in all accounts.

Now my US account is -10,851.19 cash
And Cdn short account +15,076.01 cash
Cdn margin account is 0 cash, unchanged

Do you think I should transfer in the USD cash now to get rid of that negative US cash balance, or does it not matter until settlement?

 

[GoldStone]

I don't think it matters until settlement, but I won't guarantee this in writing.

 

[james4beach]

Trades settle January 5, at which time I'll phone and ask them to journal the shares.

Today I phoned TDDI and followed GoldStone's script

rep: How can I help?
me: Please take a look at account -F (us margin)
rep: Yes
me: I bought 200 shares of RY, they settle today.
rep: Yes I see they're settling today
me: Can you please journal them to account -G ?
rep: I will recap, you want to transfer 200 shares of RY from account F to G, is that correct?
me: Yes, thanks.

 

[GoldStone]

Is journalling done?

I usually call early in the day and it's normally done within a few hours. Their execution has gotten much better in the last year.

 

[james4beach]

Yes it's done, I see 0 shares in both accounts involved. It happened within a few hours of phoning.

That was the easier TDDI gambit I've ever done! I'll wait a day for the mark to market stuff to undo itself, and I should see the net proceeds of the gambit appear in the margin account.

 

[humble_pie]

you 2 are so funny .each:

it's always been possible to do the short-first gambit. TD has always opposed it. Opposed it devoutly, religiously, feverishly.

of course, there have always been a precious few ultra-hi-value clients who have continued to ShoGam at the big green, ie they always gambit by shorting first. The big green puts up with them because these are the extremely valuable diamond clients. Alas, however, most of us cmf forum peasants are not diamond clients anywhere.

imho, james4 & goldstone, you've let the cat out of the bag. If your posts unleash a tsunami of ShoGam trades like the above - or even a minor tidal wave of ShoGams - i'm betting that the big green is going to block the traffic.

whatever possessed you 2 guys to get up & babble everything out in public to the watching forum? IMHO you 2 may have sabotaged your own longtime chances for doing the ShoGam Slam. Better you should have said nothing. Better you should have silently continued on your merry ways, surreptitiously taking advantage of novice licensed reps at the TD who aren't experienced enough yet to catch on to what you are actually doing.

elsewhere i've explained why gambit short-first strategies will inevitably burden brokers with hard consequences they cannot support. Which is why brokers will, if serious ShoGam traffic develops, act to prevent it.

PS the ShoGam strategy will likely work - at least until they block it - at all other brokers. Save & except BMO & RBC, where one can gambit online with perfect ease, no need to use an official short account.

 

[james4beach]

In all seriousness, any chance we can delete this thread then? I hate to be responsible for letting the cat out of the bag.

 

[GoldStone]

Nothing stops you from deleting your own posts, if you are THAT concerned.

 

[humble_pie]

In all seriousness, any chance we can delete this thread then? I hate to be responsible for letting the cat out of the bag.

james it wasn't you who let the cat out of the bag. It was the TD resource officer himself, remember? he instructed you, ever so precisely, how to do the short-first gambit. To illustrate for you, he even changed your original sell order to a short order.

because of this, i'd say that for the rest of time, you yourself have a personal license & an inalienable right to do the ShoGam Slam whenever you feel like it.

plus it's also possible that i'm out of date. It's possible that the new deal is the big green currently desires that every client should ShoGam. It's possible that your resource officer was simply spreading the glad tidings. I doubt it, but it is possible.

lastly, keep in mind that no broker backlash can develop unless such a critical mass of ShoGam orders builds up that a broker comes to find itself genuinely inconvenienced. The inconveniences are 1) depletion of the official loan post short inventory, & 2) the obligation every broker has to report every short share to its exchange, every night.

these inconveniences are not yet occurring in large numbers. They may never occur. A few ShoGams now & then are not going to make any difference.

what would make a difference is a tsunami of ShoGam strategies, such as the sudden high volume of gambit orders that broke out in 2010 thanks to this forum & Canadian Capitalist's articles.

there may never be a tsunami of ShoGams, because the differences between traditional, scrappy & short-first gambit strategies are extraordinarily subtle. I rather imagine that you, james4, are one of the few who grasped everything .each:

 

[james4beach]

That makes sense! This method also requires that one has a short selling account.

And that's right ... the TD rep himself walked me through the procedure. License to ShoGam, it is!

Love these conversations, as usual. Thanks to both of you!

 

[james4beach]

Doing another ShoGam today. I liked that USD is over 1.30 again!

FX market rate: 1.3053
short 500 TD @ 57.00 CAD for proceeds: 28,490.01 CAD
buy 500 TD @ 43.6774 USD for cost: 21,848.69 USD
Net conversion rate: 1.3040

FX fee achieve with gambit: 0.10%

A new record low conversion fee for me!

 

[james4beach]

Of course the USDCAD would go up nearly a percent right after I sold 20k worth... argh

By the way, this time I phoned an agent on the same day I made the trade and left a request to journal the shares once they settle. The agent said she'd write a note to herself. This seems convenient, if she remembers to actually do it. Perhaps I should phone back on settlement anyway?

 

[james4beach]

I did a little exercise this morning to see if by waiting and trying to time my gambits, I've actually been able to beat the "average" USDCAD rate (my goal is to sell USD at highest possible rate). During the time I've worked in the US, I've recorded the spot FX rate at each paycheque.

If I had automatically converted each paycheque at spot rates, i.e. regularly, the average rate would have been 1.2345
When I look at all my gambits (total CAD out / total USD in), the average USDCAD rate that I realized is 1.2514

So far, I have been successfully timing the FX market it seems Or just gotten lucky.

 

[james4beach]

Time for another short-first gambit, USD -> CAD. Seems like a good time; USDCAD is 1.3395 which is the highest since March.

short 200 TD @ 60.14 CAD for proceeds: 12,018.01 CAD
buy 200 TD @ 44.8847 USD for cost: 8,986.93 USD
Net conversion rate: 1.33728

FX fee achieved with gambit: 0.17%

Very nice fills from TD on TD Look at that implied rate from the stock difference, (60.14/44.8847=1.3399) is actually better than spot FX.

 

[humble_pie]

.

jas4 you are playing with fire! the short-first gambit strategy is the Achilles' heel of gambit trading, for TD as well as for every other broker not using the ADP mainframe system.

me i've always known about the short-first gambit strategy but i've never suggested it to others in cmf forum. Because i'm a responsible poster who would not put others in harm's way. Short-first gambit trading is a strategy that costs brokers money. It also impairs brokers' loan inventories. Until very recent years TD has always acted forcefully to prevent it.

puzzlingly enough, in very recent years the TD appears to be not only allowing this instant, online low-commission gambit strategy but even to be actively encouraging short-first gambit pairs.

the problems for the broker are twofold:

1) the short-first gambit introduces a formal short position which the broker must record in its overnight short report to the exchanges. It also requires the broker to pay fees to the exchange which is hosting the short position. For this reason alone, it's easy to understand that a broker would balk at short-first currency gambits.

2) tying up a broker's loan post inventory of shortable stocks is another reason why brokers discourage short-first gambit trades.

nowadays - puzzlingly enough - the TD appears to be 100% unaware of the broker-toxic aspects of shorting a gambit pair. It's as if this broker has opened a rear ground-floor window & invited all the neighbourhood break-in artists to climb right on in.

the low-cost instant online gambit strategy would probably work equally well at other brokers - scotia, hsbc, cibc - who use the ISM mainframe, which makes regular gambit trading difficult by blocking the instant online sell side. A short-first strategy might even work at questrade, which has its own custom-built mainframe.

clients attempting short-first gambit pairs should understand that there is a possible failure point. This failure point will only occur after both online gambit trades have been executed. Clients with non-ADP mainframe brokers must next phone the broker to request that the covering stock be journalled across the 2 currencies. This is the point where a broker can intercept or refuse.

best of luck to everyone who tries short-first gambit pairs at the TD. If it were myself, i would simply open an account at one of the 2 ADP-based online brokers. With these brokers - there are only 2 in the whole of canada - gambit pair trading is fast, easy, online, instant, cheap & seamless.

.

 

[james4beach]

Thanks humble, you're right that the broker can cause problems once you phone and ask to journal.

Can you remind me again, which are the two brokerages that allow fast easy gambits?

 

[agent99]

Can you remind me again, which are the two brokerages that allow fast easy gambits?

With BMOIL, I never have to call anybody.