Reconciling Your Records Against the Broker
A monthly routine that catches the errors which otherwise surface at tax time.
Course contents73 lessons · 28 questions
Reconciliation is the least interesting habit in this course and one of the highest-value. It takes about fifteen minutes a month and it catches the errors that otherwise surface in April, when they are expensive and the source records are cold.
The premise is simple: your records and the broker's records should agree. Where they do not, one of you is wrong, and you want to know which within weeks rather than months.
What actually drifts
Not random noise — a specific, repeatable set of five things.
| What drifts | Why | Cost if missed |
|---|---|---|
| Assignments you did not notice | No notification, overnight | Basis wrong from then on |
| Fees never logged | Tedious, easy to skip | Returns overstated all year |
| Fill price differs from what you recorded | You logged the mid | Slippage invisible |
| Roll recorded as one leg, not two | Combined ticket | Double count either way |
| Expired positions still showing open | Never closed in the log | Open premium wrong |
The errors a monthly reconciliation catches, roughly in order of frequency.
Every one is trivial to fix in the month it happens. The assignment row is the expensive one: miss it and every subsequent covered-call figure on that stock is computed against the wrong cost basis.
The routine
Fifteen minutes, once a month, in this order. It matters that positions come before cash, because a position discrepancy usually explains a cash one.
1. Open positions match. Pull the broker's current positions and compare to what your log says is open. Anything on one list and not the other is the whole point of the exercise. This single check catches assignments, early exercises, and positions you closed but never logged.
2. Every closed position has an outcome. Expired, bought back, assigned, called away, rolled. A position with no recorded outcome is a hole, and holes propagate.
3. Cash movements tie out. Sum the month's option credits and debits in your log and compare to the broker's activity total. A gap here after steps 1 and 2 pass is almost always fees.
4. Fees are captured. Commissions, contract fees, assignment and exercise charges, and regulatory fees. Most brokers itemise these on a monthly statement even when the trade confirmations bury them.
5. Share lots agree. If you were assigned or called away, confirm the share count and that the basis in your records reflects the premium adjustment.
When they disagree
The broker is right about what happened: fills, assignments, fees, dates. Their record is the transaction record and yours is a copy of it.
You are right about what it means: which leg a roll replaced, which campaign a trade belongs to, what your effective basis is. The broker has no view of any of that and never will.
So the rule is: correct your facts from their statement, and never let their framing overwrite your structure. If the broker shows two unrelated trades where you have a roll chain, the broker is not wrong — it simply does not model the relationship.
Why monthly rather than quarterly
Statements arrive monthly, memory of what you intended lasts about that long, and errors compound. An unnoticed assignment corrupts three months of covered-call figures if you find it in month four, and one month of figures if you find it in month two.
Quarterly is a reasonable fallback. Annually is not reconciliation; it is archaeology, and it is the reason year-end close is painful for people who skipped it.
What can go wrong
Only checking cash. Misses the structural errors entirely.
Letting the broker's view overwrite your chains. They do not model roll linkage or campaigns, and importing their structure destroys yours.
Skipping fees because they are small. They are small and systematic, which is the worst combination for a performance figure.
Reconciling only when something looks wrong. The errors that matter are the ones that do not look wrong.
Key takeaways
- Fifteen minutes a month catches errors that cost hours in April.
- Five things drift predictably: unnoticed assignments, unlogged fees, mid-versus-fill prices, roll legs, and stale open positions.
- Reconcile positions first — a cash discrepancy is usually a symptom of a position one.
- The broker is authoritative on what happened; you are authoritative on what it means.
- Monthly matters because errors compound: an unnoticed assignment corrupts every subsequent figure on that stock.
Check your understanding
1. Why reconcile positions before cash?
2. Your log shows a roll chain; the broker shows two unrelated trades. Who is wrong?
3. Which drift is most expensive to discover late?