Some financial instruments are "Section 1256 contracts" that must be "marked to market" at year-end. Marked to market means to treat the instrument as if it were sold at the end of the year at its fair market value. The resulting gains and losses are treated as 60% long-term and 40% short-term regardless of the actual holding period.
Section 1256 contracts are:
Regulated futures contracts, such as commodities futures.
Foreign currency contracts.
Nonequity options.
Dealer equity options.
Use Form 6781, Part I, to report gains and losses on Section 1256 contracts.
A "straddle" is when you hold contracts that offset the risk of loss from each other. If you realize a loss when you sell part of a straddle position, your loss may be disallowed. The straddle loss rules and exceptions are quite complicated. See the IRS instructions for Form 6781 and IRS Publication 550 for more information on reporting straddle losses.