What Happens If a Trader Does Not Make a Mixed Straddle Election?

If no election is made, the trader must separately track and apply the rules for each position. The Section 1256 contracts are subject to 60/40 and mark-to-market, and the non-1256 contracts are subject to standard capital gain/loss rules.

This requires complex offsetting rules to prevent the recognition of a loss on one leg before the gain on the other.