What is Norbert’s Gambit?
Norbert’s Gambit is a currency conversion technique. It allows the inexpensive exchange of Canadian to US dollars, or vice versa, using a discount brokerage account. On large enough transactions, the obtained exchange rate will be significantly better than that offered by banks to retail customers (banks typically charge fees of 1% or more), or that offered by discount brokers to convert currencies without using the Gambit. The technique relies on either interlisted stocks or certain dual-currency exchange-traded funds (ETFs).
The origin of the name
The technique was first described publicly to members of The Wealthy Boomer, a predecessor to the Financial Wisdom Forum, by Norbert Schlenker in 2001. He developed the method for his personal use some years earlier. A lengthy discussion of the technique, its nuances, potential problems, and the idiosyncratic behavior of various discount brokers can be found here.
Summary
Convert CAD to USD:
When converting CAD to USD, you will want to buy DLR.TO and sell DLR.U.TO.
Convert USD to CAD:
When converting USD to CAD, you will want to buy DLR.U.TO and sell DLR.TO.
How to Norbert Gambit with Questrade
Step 1 – Purchase DLR.TO on the TSX
Select ‘TRADE’ (the big green button) and enter DLR.TO in the order entry form. Based on the amount you have to exchange, calculate the number of shares you can buy. I usually use the ‘ask’ price to calculate the number of shares and I use the limit order.

The ETF purchase will have a transaction cost of $0 but it may include an ECN fee (learn more about ECN fees – reading/removing liquidity).
Step 2 – Wait for the Transaction to Settle
The transaction will settle after 2 business days. It means you officially have the shares in your account. Once you see DLR.TO in your account, contact Questrade by phone or chat to journal the shares over as DLR.U.TO.
Step 3 – Sell DLR.U.TO on the TSX
Once you see DLR.U.TO in your account, you can place your sell order with the same number of shares. The transaction cost is the Questrade’s selling fee plus the ECN fees in the currency of the trade.
Step 4 – Get Your Money
You will have to wait for the transaction to settle and then you can transfer your money out or use it to purchase stocks or ETFs.
VIDEO on how to do Norbert’s Gambit
Pitfalls and problems
- The commissions and bid-ask spreads make this method uneconomic for amounts under about $10,000. The amount will vary based on the commissions charged.
- Automated trading systems at discount brokers can pose roadblocks and therefore risk a change in the realized exchange rate. While the initial purchase is usually problem free, the sale of the position on the other side of the border may not be automatic. (This is usually an artifact of the way the broker separates the Canadian and US parts of one account, something computerized systems aren’t necessarily equipped to handle.) Markets can move against you, so it’s best to get the balancing sale done as soon as possible. It may be necessary to use a short sale or to override the electronic systems by making a phone call and speaking to a representative. Telephone trades handled by staff are usually more expensive than electronic trades, but investors using this technique should insist on being charged the lower electronic commission in such cases, as the telephone and staff wouldn’t have been required if the broker’s system was up to snuff.
- If using a short sale, execute the short before you buy, otherwise you might run into a roadblock based on the “shorting against the box” rule[2]
- If your broker’s system requires you to use a short sale, you usually must request that the broker journal shares from the long side to cover the short on settlement date two business days (T + 2) later. This usually requires a phone call to the broker.
- Exchanging funds on a wild day in the markets may get you a rate nowhere near spot.
- If exchanging in a taxable account, do not use a stock you currently own to convert funds with this method, nor any stock that you have owned within the previous 30 days or will own in the following 30 days. You will run afoul of the superficial loss rules in the Income Tax Act needlessly, so pick another stock.
- Be careful around major holidays in either the U.S. or Canada. Volumes are light so bid-ask spreads are bigger and, if it’s near a holiday that is only observed in one country, settlement dates will not match and you will end up temporarily short or long for an extra business day.
- Some stocks you could use pay dividends, e.g. the big Canadian banks. Avoid such stocks just prior to ex-dividend dates, because you will end up collecting a dividend on one side of the account and paying it out on the other. In a taxable account, the dividend you collect is taxable income and the dividend you pay is not deductible. In a registered account, the deemed payment out of the account runs afoul of other tax rules.
- It is vital that the settlement currency is set to the correct currency. Some discount brokers have the option to sell (or buy) a US listed stock (US Dollars) and settle in Canadian Dollars, which would convert everything back into Canadian currency, using the broker’s exchange rate. Make sure both your trades are settled in the appropriate currency.