DLR is a currency ETF that simply holds US dollar cash equivalents and trades in Canadian dollars. Interlisted arbitrage trading forex’s how you can use DLR to convert Canadian dollars into US dollars.
Get a quote on DLR after logging in to your discount broker. Make sure that the bid-ask spread is 2 cents. Since DLR has very low volume put in a limit order at the current ask price. Call your discount broker to journal DLR to your US investment account. Wait 2 business days for the shares to get journaled over. Put in a limit order at the current bid price. When the trade is executed, you’ll have converted CAD into US dollars.
To convert USD into CAD, investors would purchase DLR. U in their US investment account and sell DLR in their CAD investment account. The typical discount broker charges 1. 5 to 2 percent on currency conversions. U will cost an investor just two trading commissions plus 2 cents spread per share. Here’s a concrete example from a recent currency conversion I did in my TD Waterhouse account.
When you journal DLR over to the US Dollar account, the ticker symbol may remain the same. However, you will be able to put in a sell order for DLR. Don’t forget to note down the bid price of DLR because the difference between your purchase price and sell price in Canadian dollars should be declared as capital gains or losses in your taxes. I would have thought you’d have saved more than 0. I’ll have to try this with Questrade and see how it goes. U is more or less fixed.
10 for the bid-ask spread or 0. If we exchange more dollars, the savings would be more. I assume you can do it backwards to buy Canadian Dollars with the US currency? Could this be a good method to make gains on arbitrage? JP: Yes you can buy DLR. U first and later sell DLR to exchange US dollars into Canadian dollars.
I’m not sure I understand your comment about arbitrage. Yes but will this work in an RSP, where most of us have our savings? RBCDI and other brokers where you can hold US and CAN in the same account? DLR using CAD, then immediately sell it choosing to receive the results in USD? Buy POT on the TSX and sell POT on the NYSE.
For RRSP accounts at RBC DI, it should also be exactly the same because you can separate CAD and USD RRSP accounts at RBC DI. Would this be a good option to make money by currency trading? USD when the CAD is high and selling USD when CAD is low? Canadian Capitalist, I guess that’s my confusion, as I only have one RSP account, but when I purchase I can choose to purchase using US or CAN funds, and when I sell a security I can choose what currency to settle it in.
I can hold both US and CAN funds within the same account. I have not tried any of these transactions yet. I’ll have to call them and confirm, and maybe test one out to make sure I know how it works. Just a minor point, but TD Waterhouse Canada actually charges 1. It’s been this way for a while. We investors shouldn’t be content paying high currency exchange fees.
This method is definitely the way to go when performing currency exchanges. USD holding, say SPY and buy a CAD holding, say XIU using this method. RBC doesn’t seem to be trading it yet. I received the following message when I tried to sell DLR. We are unable to accept an electronic order for this symbol at this time. To place an order for this symbol, please contact your RBC Direct Investing Inc.