I am trading options e.g. buying a 60 strike and selling a
70 strike.  How do I report these trades on my tax returns?
Thanks
Art

Hello Art,

Use Form 1040, Schedule D to report a short-term capital gain or loss.  But, if you are trading European exercise, cash-settled index options (section 1256 contracts), then report on Form 6781.

Treat this spread as 2 separate investments.

For the 60 strike, you buy now and sell later.  Report a gain or loss for the calendar year in which you sell the options to close the position.

For the 70 strike, you sell now and buy later.  Report a gain or loss for the calendar year in which you buy the options to close the position.

Mark