Company: ETY
Filing Date: 2025-02-14
Form Type: N-2ASR
Source: 0001193125-25-026876
Chunk: 50

Company: Eaton Vance Tax-Managed Diversified Equity Income Fund
Filing Date: 2025-02-14
Form: N-2ASR
Chunk 50
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 Under certain circumstances, however, the Fund may enter into options transactions or certain other investments that may constitute positions in a straddle. In addition, in keeping with the Fund’s strategy, described below, of selling index call options and purchasing index put options that qualify for treatment as Section 1256 contracts under the Code on which capital gains and losses are generally treated as 60% long-term and 40% short-term, regardless of holding period, the Fund may be limited in the manner in which it writes options on indices based upon foreign stocks. Because many foreign-traded stock index options do not currently qualify for treatment as Section 1256 contracts under the Code, the Fund generally intends to sell options on broad-based foreign country and/or regional stock indices that are listed for trading in the United States or which otherwise qualify Section 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