Most profits from trading call options are short-term capital gains, on which you pay your marginal tax rate. In some circumstances, a call will lead to a long-term capital gain. When you buy a call, you have the right to buy some amount of an underlying asset for a pre-established price, the strike price, on or before an expiration date. Periods until expiration usually range from one to three months but can be longer. An especially complex area of risk involves taxes. If you are like most people, you understand how taxation works, generally speaking.
While the world of futures and options trading offers exciting possibilities to make substantial profits, the prospective futures or options trader must familiarize herself with at least a basic knowledge of the tax rules surrounding these derivatives. This article will be a brief introduction to the complex world of options tax rules and the not-so-complex guidelines for futures.