Attempt 1: USD to CAD
I was understandably nervous with this being my first attempt. Worst case I might end up with a shares in Royal Bank that I didn't want and some kind of invalid transaction fee for trying to sell shares I didn't own.
|Step 1:||Purchased NYSE:RY shares @ 55.26 USD|
|Step 2:||Sold equal number of TSX:RY shares immediately @ 55.48 CAD|
The exchange rate at this point was 1 USD = 1.00353 CAD, so my break even price for selling would have been $55.455, I sold at a profit of around 0.045%. This is a lot better than paying 0.965% for my bank to convert.
One gotcha I wasn't anticipating was the time for the transaction to clear. Immediately after the trade I showed as owning a positive number of shares in my USD account, and a negative number in my CAD account - this was my worst nightmare! After a little research I found another another RBC user who claimed that if I waited a couple days this would sort itself and it did. 48 hours later I showed as owning 0 shares of RY in either account, and my cash had cleared.
Attempt 2: CAD to USD
I attempts this trade a few days later after my first attempt had fully cleared.
|Step 1:||Purchased TSX:RY shares @ 55.91 CAD|
|Step 2:||Sold equal number of NYSE:RY @ 55.06 USD|
The exchange rate at this point was 1 USD = 1.01505 CAD, so my break even price would have been $55.081/share. I sold at 2.1 cents under that, or a penalty of 0.038%. Still much better than the 0.965% my bank would have charged.
What about Trading Costs?
I got lucky, averaging a 0.007% profit on my trasactions. Canadian Capitalist says on average you'll pay 63 basis points (0.63%) which is 0.345% less than my bank charges. If you're lucky you'll pay less, but you might pay more.
It also costs two trades (for me $20) to execute Norbert's Gambit, so how much money do you have to convert to make it worthwhile?
Assuming 63 basis points and the 0.965% comparable conversion fee from a bank, you will break even on average on a transaction of $5800. For every $1000 you convert over the break even point on average you will save $3.45, or about the cost of a latte.
Should you do Norbert's gambit?
- Do you need to convert $5,000+?
- Does your broker charge you $10 or less for trades?
- Does your broker support selling interlisted stocks?
- Do you like lattes?