Who qualifies as a commodities trader?

A commodities trader is specifically defined by their engagement in the trading of section 1256 contracts, which encompasses various derivatives such as futures contracts and options on futures. These contracts are regulated and can include commodities like oil, gold, and agricultural products. By being actively involved in these trades, the individual operates within the framework established by the IRS for commodities trading, which allows for special tax treatment of gains and losses.

In contrast, trading real estate, investing in stocks, or working for a financial institution does not align with the definition of a commodities trader. Real estate involves different kinds of assets and is governed by separate tax rules. Stock investments fall into the realm of equity trading rather than commodities. Working for a financial institution may involve various types of financial activities, but it does not inherently qualify an individual as a commodities trader unless they are directly engaged in trading section 1256 contracts. Therefore, the correct answer highlights the specific involvement with section 1256 contracts that defines a commodities trader.