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I've been through this too. See http://boards.fool.com/Message.aspx?mid=29070669&sort=wh...

It's quite a snafu! Jess, your situation looks like you "need" to do part II and part III of form 6781. Part I is simple and reserved for section 1256 contracts which are, mostly, commodities futures, options on these futures, and perhaps some options on stock indexes. Not the stuff that most of us fools deal in (stocks and stock options). The broker reports your mark-to-market, you put it on part I of 6781 and done deal!

But many of us unwittingly blunder into straddles and this form is a nightmare. I cannot find an automated solution that handles both straddles and does wash sales across stocks and options. Manually dealing with the form or moving trades across two pieces of software is inviting errors greater than the timing error of ignoring straddle loss deferrals.

So I too am at a loss of how to proceed. I suspect that many options investors unwittingly create straddles, lose on one leg while another remains open, and remain blissfully unaware of these complications.
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