Hi everyone:
I'm writing to share a recent success that will save me a lot of money when trading in my tax sheltered retirement accounts.
Here in Canada, the government has a rule for the banks that they cannot retain any foreign currencies in the "registered retirement account". They are however allowed to keep foreign equities in the account. These are accounts that are tax sheltered until such time as funds are withdrawn from the account.
Administrative advantages, tax sheltered accounts.
So here is what I have devised and am currently testing. I sold my TZA very close to a peak, and on the same day I replaced it with a combination of UUP and UDN (equal value). Then I requested that the broker net out the FX, meaning that there was no foreign exchange charges, because they took the US dollars from the sale of TZA and applied it directly to the purchase of UUP&UDN.
When the $US goes up so does UUP. When the $US goes down, UDN goes up. The net effect is zero in my account because I have hedged against currency volatility. The most beneficial part of this strategy is that the "Bank" is not eating my breakfast lunch and dinner. Also I am sitting with a US dollar equivalent ready for my next US equity trade. I'm not having to worry about arbitrage between the $C and $US. I will sell my UUP&UDN the same day that I purchase equal value of my next puchase.