Exchange-traded funds (ETFs) are all the rage in the financial markets. They are investment funds that are not burdened with more expensive mutual-fund regulations and restrictions, and can be composed of securities, commodities, futures, and other instruments (they also can be hybrids that contain derivatives).

There are other perks to ETFs. Many online brokers offer commission-free ETF trading. Trading professionals avoid wash-sale loss deferrals, straddles, and hedging rules by using ETFs. Rather than purchase a “substantially identical” security, triggering these complications, traders often find an ETF to mimic the replacement. It’s not a pure economic offset, but close enough to navigate around tax-loss deferral.