Company: ETY
Filing Date: 2025-02-19
Form Type: 424B5
Source: 0001193125-25-029518
Chunk: 60

Company: Eaton Vance Tax-Managed Diversified Equity Income Fund
Filing Date: 2025-02-19
Form: 424B5
Chunk 60
---
1256 contracts under the Code. Options on foreign indices that are listed for trading in the United States or which otherwise qualify as Section 1256 contracts under the Code may trade in substantially lower volumes and with substantially wider bid‑ask spreads than other options contracts on the same or similar indices that trade on other markets outside the United States. To implement its options program most effectively, the Fund may buy and sell index options that do not qualify as Section 1256 contracts under the Code. The Fund’s index option strategy is designed to produce current cash flow from option premiums and to moderate the volatility of the Fund’s returns. This index option strategy is of a hedging nature, and is not designed to speculate on equity market performance. The Adviser believes that the Fund’s index option strategy moderates the volatility of the Fund’s returns because the option premiums received will help to mitigate the impact of downward price movements in the stocks held by the Fund, while the Fund’s obligations under index calls written constrains the Fund’s ability to participate in upward price movements in portfolio stocks. The Fund expects normally to sell index call options on a portion of its common stock portfolio value. The Adviser does not intend to sell index call options representing amounts, in the aggregate, greater than the value of the Fund’s common stock portfolio (i.e., take a “naked” position). The Adviser generally sells index call options that are exchange-listed and “European style,” meaning that the options may only be exercised on the expiration date of the option. Exchange-traded index options are typically settled in cash and provide that the holder of the option has the right to receive an amount of cash determined by the excess of the exercise-settlement value of the index over the exercise price of the option. The exercise-settlement value is calculated based on opening sales prices of the component index stocks on the option valuation date, which is the last business day before the expiration date. Generally, the Adviser sells index call options that are slightly “out‑of‑the‑money,” meaning that option exercise prices generally will be slightly above the current level of the index at the time the options are written. The Fund may also sell index options that are more substantially “out‑of‑the‑money.” Such options that are more substantially “out‑of‑the‑money” provide greater potential for the Fund to realize capital appreciation on its portfolio stocks but generally would pay a lower premium than options that are slightly “out‑of‑the‑money.” The Adviser expects to follow a