How Does the “Identified Mixed Straddle” Election Work?

An identified mixed straddle election allows a trader to designate a specific set of offsetting 1256 and non-1256 positions as a single straddle. The gain or loss is then calculated on the entire straddle, and the tax character (short-term, long-term, or 60/40) is determined based on rules that aim to match the character of the gain and loss.