How Does the Tax Treatment of Broad-Based Index Options Compare to Single-Stock Options?

Broad-based index options (e.g. S&P 500 options) are generally classified as non-equity options and thus are Section 1256 contracts.

They are subject to the mark-to-market rule and the 60/40 capital gains split. Single-stock options are generally not Section 1256 contracts and are taxed under standard capital gains rules, where the holding period determines the short-term or long-term character.