The blended rate is materially lower than ordinary income for a high-turnover trader, which is the main tax argument for trading index futures and broad-based index options rather than individual equity options.
Covered contracts include regulated futures, broad-based index options such as those on the S&P 500 index, non-equity options and certain foreign currency contracts. Options on single stocks and narrow-based indices are excluded, and exchange-traded fund options usually follow the equity treatment rather than the index treatment.
Positions open at year end are marked as if sold at fair value, so tax can be due on unrealised profit. The results are reported on form-6781 and flow to schedule-d.
This is general information for the United States, not tax advice. Rules change and depend on your circumstances; consult a qualified professional.
Related: section-1256, form-6781, mixed-straddle-election, schedule-d, capital-loss-limitation