Costs, Taxes, Accounts and Trader Tax Status

A trading edge is measured after costs and after tax, and both are larger and more complicated than the "zero commission" headline suggests. US online brokers cut commissions on stock trades to zero in October 2019 (Schwab announced on 1 Oct 2019, effective 7 Oct; TD Ameritrade the same evening, effective 3 Oct; ETrade on 2 Oct, effective 7 Oct — AP, InvestmentNews and BNN Bloomberg reports; Schwab kept $0.65 per options contract), and Robinhood had offered them since its launch. But a trader still pays the bid–ask spread, per-contract options commissions at most brokers, exchange, clearing and regulatory fees (the SEC's Section 31 fee rose from$0.00 to $20.60 per million dollars of sales on 4 Apr 2026 — SEC fee rate advisory), borrow fees on short sales, margin interest, and the indirect cost of order routing and payment for order flow (04). Then the tax system takes its share, and for US traders the rules depend on the instrument as much as on the trade. Gains on Section 1256 contracts — regulated futures and broad-based index options such as SPX — are marked to market at year end and taxed 60% long-term, 40% short-term regardless of holding period (Form 6781); the same economic trade in SPY options is an ordinary equity option, taxed short-term if held a year or less. The wash-sale rule (§1091) disallows a loss if substantially identical securities, including options to buy them, are bought within 30 days before or after the sale — and a replacement bought in an IRA makes the disallowance permanent (Rev. Rul. 2008-5, as summarised in secondary sources). Straddle rules (§1092, 1981) defer losses on positions offset by unrealised gains; constructive-sale rules (§1259, 1997) tax "locking in" an appreciated position. A full-time trader may qualify for trader tax status and elect §475(f) mark-to-market accounting, which converts gains and losses to ordinary and removes the wash-sale problem — but only by an election made by the unextended due date of the prior year's return (IRS guidance and private letter rulings, as web-checked). Europe adds transaction taxes: France's financial transaction tax on purchases of large French companies' shares rose from 0.3% to 0.4% in April 2025; Italy's, introduced in March 2013, was doubled from 1 Jan 2026 (reported); the UK charges 0.5% stamp duty or SDRT on most share purchases. This section sets out the cost stack, US tax rules for traders (rule 10 — every rule here should be checked against current IRS text before use), the main account types and the European taxes. It has no worked example of its own: the main book's Appendix A computes cost and tax drag by turnover (A.3), and this section refers to it. Nothing here is tax advice.