Section 1256 contracts — a category that includes regulated futures and broad-based index options (such as options on the S&P 500 index, SPX) — receive special tax treatment: gains and losses are taxed 60% at the long-term rate and 40% at the short-term rate, regardless of how long you actually held them. (General education, not tax advice — consult a professional.)
Why 60/40 matters
Normally, a position held under a year is taxed entirely at your (higher) short-term ordinary-income rate. For an active trader who holds for days or minutes, everything is short-term. Section 1256's blended 60/40 rate means even a one-minute trade gets 60% of its gain taxed at the lower long-term rate — a meaningful break for a high-volume trader, purely from the instrument's classification.
What qualifies
The key qualifier for options traders is broad-based index options — index options like SPX, not options on individual stocks or narrow-based products. This is one of the concrete differences in the SPX vs SPY comparison: SPX options are §1256 (60/40), while SPY options (being options on an ETF) are generally taxed as regular short-term gains for active traders.
Section 1256 can tax a one-minute trade like you held it for a year — 60% of it, anyway.
The takeaway
For a high-volume trader, the 60/40 treatment of §1256 contracts can be a real, structural tax advantage worth understanding when choosing what to trade. It also comes with mark-to-market treatment at year-end (open positions are treated as if sold). This is general information only — the specifics depend heavily on your situation, so a qualified tax professional should advise you.