Options on UVXY - Are they Sec. 1256 contracts?

Discussion in 'Professional Trading' started by Jreality, Sep 21, 2013.

  1. Jreality


    It seems to me that options on UVXY are section 1256 contracts, because they are "non-equity options." However, I can tell that Fidelity is not treating these options as section 1256 contracts, because on their Gain/Loss worksheets, they allocate a regular VIX contract transaction (an option on plain old VIX) to both long and short term as per the Sec. 1256 rules, but they consider UVXY options transations to be 100% short term (if the trade was actually short term).

    To be clear, it would appear that Fidelity doesn't consider UVXY options to be Section 1256 contracts, while they consider options on plain-old VIX to be Section 1256 contracts.

    I take it that I still have a choice as to whether I want to report UVXY options transactions under section 1256 or not...is that correct?

    What about in 2014?....when the options reporting rules take effect....will I still have a choice as to whether UVXY options transactions are reported as section 1256 contracts or am I at the mercy of the broker?


  2. 1245


    UVXY is a ProShares ETF that distributes a K1. The 60/40 is for futures and cash settled indexes. I believe your broker is correct.

  3. Jreality


    Over the years, I've always been reporting UVXY options as ordinary capital gains and the brokers have been reporting it that way on their 1099s as well. However, this year, one broker (TD) issued a CORRECTED 1099 reclassifying all the 2016 UVXY options trades as 1256. The other 2 brokers have LATER released their FIRST releases of 1099s, and they are reporting UVXY options the way they always did, and I'm not really expecting them to change their method.

    Seems strange that one broker suddenly decided to reclassify all the UVXY options trades as 1256, but the other 2 are doing what they've always done.

  4. Robert Morse

    Robert Morse Sponsor

    It is my understanding that they have to be cash settled options to be considered 1256 or options on futures or futures.