BlackRock broke more new ground for crypto this week, as options began trading on its iShares Bitcoin Trust ETF. The options contracts, sold on the Nasdaq, let investors embrace the OG crypto’s volatility by allowing them to buy or sell it at a predetermined price. And they were popular from the start – with over 70,000 options contracts sold in their first hour of trading on Tuesday.

So let’s take a look at how these assets work – and three ways that you might take advantage of them.

Okay, how do these bitcoin options work?

The clue is in the name: options give you the “option” to buy (call) or sell (put) an asset sometime in the future. And in this case, that asset is BlackRock’s iShares Bitcoin Trust ETF (ticker: IBIT; expense ratio: 0.35%) – the biggest bitcoin exchange-traded fund in the world. The ETF buys and sells actual bitcoin to match investor demand, and as the chart shows, the ETF (orange) tracks the crypto’s moves (blue) almost one-for-one.

The IBIT options give investors a new way to profit from or hedge against bitcoin’s price swings – without trading actual bitcoin itself. Until now, US retail investors had no access to bitcoin options. Crypto exchanges like Deribit and Binance offered them, sure, but Americans were barred from derivatives trading on those platforms. Now, however, thanks to BlackRock, they can access bitcoin options through regular brokers.

So with that explanation out of the way, here are three ways you might play this.

1. Buy IBIT call options – and hope for a “gamma squeeze”.

Bitcoin’s been on a rampage this month, going into blue-sky breakout mode after smashing through its March high of $74,000. And I get it: buying bitcoin now – after such a big run-up – feels risky (and it should). But if history is anything to go by, the “orange coin” (that’s bitcoin in crypto circles) could still have plenty more fuel in the tank.

And, yeah, that’s where the IBIT call options come in. They let you capture some of that potential upside while capping your downside risk to just the premium (upfront fee) you pay. And if we see a “gamma squeeze” – where market makers buy up IBIT shares to hedge against rising call option demand – those gains could accelerate even faster.

As an example, let’s look at the $60 IBIT call option expiring on December 20. This option traded at $1.90 per share on Wednesday (or $190 per contract, since one options contract represents 100 shares). If you bought this contract, your maximum loss would be the $190 premium you paid – nothing more.

Now, if IBIT rises above the option’s strike price of $60 before December 20, the option becomes “in-the-money” – meaning it starts to gain value. To break even on your trade, IBIT would need to climb above $61.90 ($60 strike price plus $1.90 premium). Beyond that point, any further price increase would translate to pure profit.

Keep in mind that these option prices – and IBIT itself – change constantly. And that’s part of the game: you’re aiming to buy the option low and sell it high to close out your position. IBIT is currently trading at around $55, but, hey, bitcoin is volatile.

2. Buy IBIT put options to bet on bitcoin’s fall.

If you think bitcoin’s rally is about to fizzle out, a put option lets you profit from the drop. Take the $50 IBIT put option expiring on December 20, for example. This one traded for $6 per share (or $600 per contract) on Wednesday. If IBIT falls below $50 before expiration, the put becomes “in-the-money”, and its value rises as IBIT keeps falling.

To break even, IBIT would need to sink below $44 ($50 strike price minus $6 premium). Beyond that, the lower IBIT goes, the more profit you make. If IBIT stays above $50, though, your maximum loss stays capped at the $600 premium you paid.

3. Buy IBIT put options to insure your bitcoin.

Maybe you’re a long-term crypto holder, sitting on $10,000 worth of bitcoin. Selling isn’t part of your game plan, but you’d like some protection if things turn south. In that case, you could use the same $50 IBIT put option (as an example).

Here’s how to size up your option hedge. A single IBIT put contract protects 100 IBIT shares – or $5,000 of bitcoin exposure at a $50 strike price. So to hedge $10,000 worth of bitcoin, you’d need to buy two put contracts. That would cost you $1,200 in total ($600 per contract), which effectively becomes your bitcoin insurance premium – a cost you’d incur no matter what.

Now, if IBIT drops below $50, the profit from your puts would fully offset the losses of your bitcoin position (flat blue line, in the chart). And if bitcoin (and IBIT) keeps climbing, you’d still enjoy the upside – just $1,200 less of it. This strategy – holding an asset while buying puts to hedge it – is called a “protective put”, by the way.

What’s the real opportunity here?

Look, options trading does have a steep learning curve, and we’ve only scratched the surface of what these things can do. But if you spend some time learning the ins and outs of options trading, it could pay off nicely in the long run. What’s more, options trading tends to work best with volatile assets – and we all know the OG crypto can still swing like a yo-yo.

If you do go down the options rabbit hole, though, you’ll want to get a handle on “the Greeks”. These explain how things like time and volatility impact options prices. If that’s up your street, and you’re okay with a little math, check out Theodora’s guide on options Greeks.