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Form 6781

The US form reporting Section 1256 contracts and straddles, applying the year-end mark to market and the 60/40 split before results flow to Schedule D.

Part I handles Section 1256 contracts, combining realised results with the year-end mark on open positions and splitting the total into 60% long and 40% short term. Part II covers losses from straddles and Part III gains from them.

The form is also where the Section 1256 loss carryback election is indicated, allowing a net loss to be carried back three years against prior Section 1256 gains, and where a mixed-straddle-election shows up in practice.

Because futures brokers report an aggregate profit or loss figure rather than individual trades, this form is usually short even for a very active futures trader, which is one of the quiet administrative advantages of section-1256 products.

This is general information for the United States, not tax advice; rules change and depend on your circumstances, so speak to a professional.

Related: section-1256, sixty-forty-tax-treatment, straddle-rules, mixed-straddle-election, schedule-d

See it drawn

Original diagrams for the ideas on this page. Illustrative, not real market data.

Payoff of a long straddle at expiryA V shape with its point at the strike and both arms rising through zero as the price moves away.Profit / loss per share08090110120Profit if the move is big enough, in either directionStrike 100Breakeven 92Breakeven 108Max loss 8 — both premiums, if it finishes at 100Underlying price at expiry
Long straddle: payoff at expiry. A 100 call and a 100 put bought together for 8 make a V. A quiet market that ends near 100 costs the whole 8; the position only turns positive once the price finishes below 92 or above 108, whichever way it goes.

Educational only, not advice. Spotted an error? Post in Site Feedback.