In attempt to avoid the usual 1.5-2% exchange fees levied by brokers, I perform Norbert's gambit: I purchase DLR.TO in CAD (Canadian dollars) from TSX, journal it over to DLR.U.TO, and then sell the exchange-traded fund (ETF) to obtain USD (United States dollars).
But when performing this procedure, you must wait 3 days for the purchase to settle, plus 2 days for the journaling procedure to take place. By the end of the 5 days, the ETF price might drop substantially (it dropped $12.33 to $12.12 in one day in my example). That's a (0.21/12.33) 1.7% reduction in the price of the ETF already. It is currently at $12.06 which is 2.2% lower.
When I sell the ETF after 5 days to obtain USD, I'll be selling it at a market price lower than what I bought it for and end up losing more money than I would have if I just paid the 2% exchange rate.
Can someone please clarify if Norbert's gambit is the optimal procedure to exchange CAD to USD? It seems it works well if the ETF market price is steady but not so if it drops.