If you’re an active trader, you work hard to generate profits in your trading account. You study the charts, you watch the day’s headlines, and research your entry and exit points before placing an order. If things go your way, you end up with a winning trade in your account. But if you’re using a broad-market ETF to trade options on the S&P 500®, you may be paying more in taxes than you would by using index options.* That means you may be giving up more of your hard-earned trading profits.
Many traders use a variety of ETF options products, such as SPY, to gain exposure to the S&P 500. What they may not realize is that capital gains from ETF options may be considered short-term gains and taxed at the ordinary income rate, which in 2019 ranged from 10-37%. Depending on individual trading and your tax bracket, that could be a big hit to your income.