I entered my first butterfly trade (1 lot) on 12/31/2015 without realizing the tax consequences at the time I used the form 6781 before but usually I don't have any open position at the end of the year so I only have to fill out Part 1 Now that I have an open position I have to fill out part 3 which is somewhat confusing given the 1099 form I received from my broker On that form it shows that all the options had a gain including the shorts which I don't see how that is possible since the market went down by the end of the day the 1099 form shows that I had an unrealized gain of about $1800 which I would have been happy to take it of if that really happened I am not sure where they got those numbers from but using the last price at the end of the day from the Think back in tos which I am not sure how accurate they are I got a gain of about $258 after subtracting the loss from the 2 shorts Looking at the p/l however at the end of the same day I got a loss of about $13 which I think is more accurate I think The 6781 form is kind of vague in that it says it's for Memo entry only and in the last column it says "e) Unrecognized gain. If column (c) is more than (d), enter difference. Otherwise, enter -0-" So apparently I am only supposed to enter the gains and not the losses ? Is this just to show the IRS how much gain I had but it's only a memo entry since it's not used in any calculation ? Did anyone else came across this part of the form ? Does this part of form make any sense or is this pretty much a waste of time ?