Trading between BBD.As and BBD.Bs - Gain CalculationFor those who have doubts about the advantages of trading Bs for As when the delta is less than $1 ($0.04 prior to RS) and reversing the process when the delta is about $4.00+ ($0.16+ prior to RS). Find below a simple calculation showing how much you can gain in doing so.
Lets say you want to sell 1000 B shares at the current price (currently $38.93) to generate $38930 in cash to buy A shares (currently at $39.27). Hence, with $38930 will will be able to buy 991 A shares.
Lets assume that a few months later the delta between A and B shares is $4.00 ($0.16 pre RS). Then, a delta of 16 cents between As and Bs was very typical. If you have doubts, look at former pricing data pre RS.
To make this demonstration simple lets assume the B shares remained about the same price ($38.93) but A shares have increased by $4 and are now at $43.27 ($39.27 + $4.00).
Selling 991 A shares at $43.27 generates $42880 (a net gain of $3950) in cash which will allow you to buy back 1101 B shares. Consequently, you have incresed your B portfolio by 101 shares (10%) without investing any new funds.
Subsequently you start the process again when the delta between As and Bs reduces to less than $1.00. This happens on a number of times during a year. At RS the delta was about $7 and it is now less than $1, three months later.
This is the last time I publish a post regarding this issue as you probably have enough information to use this process if interested