Section 1256 contracts are taxed differently than equity option contracts. Section 1256 contracts have lower 60/40 capital gains tax rates which means 60% is subject to lower long-term capital gains rates, and 40% taxed as short-term capital gains using the ordinary rate. Your other short-term losses will be added to the Section 1256 short-term losses and the same would apply for your long-term losses. TurboTax will do the calculations for you.
There is a Section 1256 loss carryback election and that is why you see the screen you included in your post. If eligible, rather than use the 1256 loss in the current year, you may deduct 1256 losses on an amended prior year tax return; however, the carryback loss can only be applied against Section 1256 gains. Thus, if you don't have any 1256 gains from the prior year, then your only option is to include the loss this year and if you have any losses left over, then carry forward the loss to the next tax year.
Given your tax situation, you would leave the carryback box blank and continue through the rest of the screens.
@VAer
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