I have been looking for an answer to this question for some time and hopefully someone more knowledgable can clue me in. I know it is possible to elect MTM status "for securities only" (ie not commodities). Could this loophole work? I elect MTM in securities only I earn $100k in "earned income" from my regular (non-trading) employment. I enter into a SPY / ES hedge trade that yeilds the following : Loss of $50k in SPY Gain of $50k in ES Now, because of my MTM election, my securities trading is considered "ordinary income" and not subject to the $3k max. loss. So the $50k is used against my $100k of employment income saving me $50k * high tax bracket. The futures gain is of course treated 60/40 Long/Short term, giving me a better tax rate on the $50k futures gain than I would have paid via my employment! Is there something I am missing?