Which Specific Derivatives Are Typically Classified as Section 1256 Contracts?
Section 1256 contracts generally include regulated futures contracts, foreign currency contracts, non-equity options, and dealer equity options. Crucially, this includes cash-settled futures on broad-based indices and certain cryptocurrency futures traded on regulated US exchanges.
The key requirement is that the contract must be traded on or subject to the rules of a qualified board or exchange.
Glossar
Cryptocurrency Futures
Leverage ⎊ Cryptocurrency futures contracts represent agreements to buy or sell a specified quantity of a cryptocurrency at a predetermined price on a future date, functioning as a derivative instrument.
1256 Contracts
Classification ⎊ Section 1256 Contracts refer to a specific tax designation applied to certain regulated futures contracts and non-equity options.
Section 1256
Standardization ⎊ This specific tax code provision mandates special treatment for certain regulated futures contracts, which can apply to crypto derivatives traded on designated exchanges under specific conditions.