Yes, you are too late to make election under Section 457 for tax year 2021. For 2021, the election to change your accounting to a mark-to-market accounting was due by April 2021, when you filed your tax return for 2020.
As a trader, without the MtM accounting, your gains/losses from securities trading are still considered capital gains and capital losses and consequently get reported on Schedule D and/or Form 8949 if required. Those gains and losses are subject to the same rules as capital gains and capital losses. You are correct that your trading losses offset your trading gains plus $3,000 of ordinary income. Traders, even though they are engaged in a business, do not pay self-employment tax.
You are correct that your Schedule C will only include your trader business expenses, such as internet, office rent if you have an office, and other expenses related to your business as a trader. Thus, it is entirely expected that a trader in securities with no MtM accounting status to have a Schedule C with no profit just losses.
A possible explanation as to why your audit risk may be high is that to meet the requirements to be a securities trader is a question of fact. Most people fall into the category of investors, few are actual traders, and fewer still are dealers.
@ebot
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