Does the Lack of Physical Delivery Impact the Holding Period for Capital Gains?

For cash-settled derivatives, the lack of physical delivery itself does not directly impact the holding period, but the instrument's classification does. If the derivative is a Section 1256 contract, the holding period is irrelevant due to the mandatory 60/40 rule.

For non-1256 derivatives, the holding period is critical: under one year is short-term, over one year is long-term capital gain.