A Risk-Managed Approach to Bitcoin Exposure with Hans Williams

How do you gain exposure to bitcoin's long-term potential while managing the downside risk that can derail portfolios and client confidence?

Today we are joined by Hans Williams, the head of ETF Strategy at Calamos Investments. Calamos is known for its deep expertise in risk managed and outcome oriented strategies, and the firm has brought that same discipline to digital assets through its Protected Bitcoin ETF franchise. This conversation, we'll explore the current Bitcoin macro environment while protection matters now more than ever, how these ETFs are structured to help manage volatility and how advisors are incorporating protected Bitcoin exposure into client portfolios.

Welcome to the podcast, Hans.

[00:01:03] Hans Williams: Thank you Doug, and I, I appreciate you having me on.

[00:01:06] Doug Heikkinen: Thank you. Before we get started with the question set, can you tell us a little bit about yourself and how you came to be Head of ETF strategy at Calamos?

[00:01:15] Hans Williams: Yeah. So I, I got into the ETF business about, about wow, it was going to be 14 years ago. I was on the, actually a capital, ETF capital markets desk at Guggenheim, back when Guggenheim had ETFs. And from capital markets, that was primarily helping advisors buy and sell, at the time, Guggenheim ETFs on both the primary and secondary markets helping with creation and redemption facilitation in that respect. Pretty shortly after that moved into more of a, conventional sales role with Guggenheim ETFs.

Was there for a while. In 2016, Franklin Templeton wanted to launch ETFs, so I joined Franklin Templeton to help them in that respect. Spent some time at Goldman Sachs, most recently on the sales side, and also helping with launching their derivative income covered call ETFs, and then joined Calamos as head of ETF sales a little over a year ago.

So it's been a, it's been almost a decade and a half of doing nothing but ETFs. It's been fascinating to see the proliferation of the types of ETF products come to market. Back at Guggenheim, the most complicated ETF we had was an equal weighted S&P 500 strategy, and now we're talking about options based ETFs with Bitcoin wrapped inside.

So it's been fascinating to see all of that evolve over the last 14 or so years.

[00:02:53] Doug Heikkinen: Yeah, I imagine. As I mentioned at the outset, Bitcoin has experienced another familiar cycle, reaching all time highs and then pulling back roughly 30%. From your perspective, what does this latest move tell us about Bitcoin's maturity as an asset and the risks investors need to manage?

[00:03:12] Hans Williams: Its maturity as an asset. That's hard to tell. It's still the early days. Let's not forget, in 2022, Bitcoin fell 64% that year and four years before that, about 82%-83%. I don't know if anything has changed that much in terms of volatility. You can have a weekend where Bitcoin moves 5% to 10%. And that's still holding true as we move through time.

I think when you think about Bitcoin's future, you think about it as, its market cap is about $1.7 trillion. Right around there. That's a fraction of what gold is, for example, and gold by the way, now over $5,000 an ounce.

So I think there's room for both to grow. Gold was this store of value dating 2000 to 3000 years before, BC really, and it's taken, 5,000, 4,000 years later, gold still is viewed in that light. Bitcoin is emerging as maybe the digital version of that potentially.

It's also highly volatile, so you see some end users view it as, "I'm going to use this alongside my favorite NASDAQ stock package product," whatever. It's used in many different ways. And I think for that reason, because there are so many different levels of usage to it. You're seeing folks get in early and add it to portfolios, and I think you're also seeing a lot of people stay on the sidelines and still trying to figure out, "Well, how do I use this going forward? What's most appropriate for me based on my or my clients' risk tolerances?"

A 30% decline from a high is actually is pretty, pretty normal. It's maybe even gentle in terms of the history of a Bitcoin pullback. But now Bitcoin sits at around $89,000 a coin.

The all time high is around $126,000. I think you could make a strong argument. We're back here at $126,000 potentially in the blink of an eye if you look at how Bitcoin has traded over the last 17 years it's been out. If you look at support levels, $74,000, $75,000 is real support. That was the April, 2025 low.

And from there you could look at the, $55,000 is the support level. It could go either direction over the next few months. And that's kind of how Bitcoin behaves as an asset.

[00:05:50] Doug Heikkinen: With all this volatility, and as advisor interest continues to grow. Why has downside risk management become such a critical part of the conversation around Bitcoin exposure today?

[00:06:02] Hans Williams: I think for the same reason that the upside is so, could be so meaningful as a wealth generator through the end of this decade, for example. We wouldn't be shocked if by the end of the decade, our CEO has talked about it, if Bitcoin's trading at a million a coin. Wouldn't be shocked by that.

Also wouldn't be shocked that if it continues to behave, in terms of downside potential. Again just four years ago we saw Bitcoin drop 60, 63, 64% that calendar year. That's just the nature of the beast. I think it also showcases that it's still very early in the cycle of Bitcoin as a real tangible asset that can be used in portfolios.

And when you have something so nascent, those kind of swings are normal in their life cycle.

[00:06:56] Doug Heikkinen: Certainly not for the faint of heart, huh?

[00:06:59] Hans Williams: Yeah.

[00:07:00] Doug Heikkinen: How do you frame the role of protected exposure when discussing Bitcoin with advisors who believe in its long term potential, but are concerned about short term drawdowns?

[00:07:11] Hans Williams: Yeah, and that's why we created our structure here at Calamos. What's the problem with Bitcoin? What's the need with spot Bitcoin is the ability to protect on the downside when you have an episode where Bitcoin pulls back 30 plus percent, right?

And we've been a risk manager for almost half a century now. What we've been doing with other asset classes, Bitcoin is no different here. So when you can build an option strategy like we have, that allows you to experience Bitcoin as it moves higher to a very specific level. We have three different types of risk products that have very specific and defined cap rates over the course of what we call the outcome period.

All of ours are one year outcome period, so you know exactly what your upside is to Bitcoin through this options strategy. You also know exactly what your capital risk case. In other words, when you buy it, on the day you buy it, whether it's day one of the outcome period or day 300 of the outcome period with, 65 days to go, you know what your downside looks like.

So in other words, you know if you invest a hundred dollars, worst case scenario, how much you could lose, even if Bitcoin drops by 50%, 60%. So we like the marriage between Bitcoin and this option structure because in some cases you can realize up to, depending on the product you buy, there's a cap rate associated with it.

30, 40, 50, 60% even, upside, for that outcome period. In other words, exposure to Bitcoin if it moves higher, you know what that cap rate corresponds to in terms of Bitcoin, the spot Bitcoin price in the market in terms of where that is in terms of moving higher and hitting that price. And you also know that if Bitcoin drops 20, 30%, that, if Bitcoin drops 20% with our, for example, 100% capital protect product, your $100 at the end of the outcome period, if bought on day one is going to be a hundred dollars minus the 69 basis points expense ratio. So you can pinpoint your downside, know what you're risking, and then your upside is going to be very Bitcoin-like, because in some cases some of these Bitcoin products, like the 10 and 24 products, so 10% capital risk, 20% capital risk. They have cap rates to the tune of 30 and 50% respectively on day one of their outcome periods, if you look back at what they were in 2025 when we launched them. So it's the ability to dramatically compound and meaningfully compound over the course of a 3, 5, 7 year period. If Bitcoin moves higher, if you can compound 20, 30% per year. If Bitcoin only averages that you're probably going to be pretty happy with that performance. But I think even more importantly, know exactly what your downside looks like each year so that if you invest X, X is only going to be 10% lower potentially, or 20% lower potentially, with those two 10 and 20% capital risk ETFs.

[00:10:22] Doug Heikkinen: All right. Let's talk about Calamos' protected Bitcoin ETFs and how they work. Can you walk us through the core design of the Calamos protected Bitcoin ETF franchise and how it's built to address Bitcoin's volatility?

[00:10:35] Hans Williams: Yeah, so at its essence what they are there, it's a call spread. So it's a call spread on Bitcoin with a treasury floor.

The way to think about that is, let's go to the beginning. Day one of the outcome period, you strike an options package and you're basically buying a at the money call on the spot price at Bitcoin at that point in time. You have exposure up to that cap rate. So you're then selling a call well above the price of Bitcoin. And then you're also buying a treasury floor beneath that.

So that if Bitcoin, let's do our 100% capital protect, for example. So 100% capital protect is, there's basically no risk to Bitcoin outside of our expense ratio because remember these options contracts, they clear through the Options Clearing corporation. That is a Dodd-Frank to-big-to-fail entity.

So if Bitcoin goes to zero, your options exposure expires worthless. When it's worthless, you then have exposure to the one year T bill that you add exposure to on day one of the outcome period. So it's essentially the options being worthless if Bitcoin is negative at all over the outcome period. And the T bill that was added at, say, they're discount issued, so at 96 cents on the dollar. That's written up and accretes up to par over the course of that one year period.

So you're simply left holding the T bill exposure that returns $100 back on the investment. So that's all, that's really all it is at the end of the day. It's a bull call spread on Bitcoin. Now, let's say Bitcoin moves higher, you want to know what your cap rate is on day one, which is published on our site, and we mark to market that on our website every 15 minutes during the trading day.

But I'll give you an example. Our January Bitcoin 100% capital Protect ETF a year ago hadn't had an 11% net of fees cap. So that meant Bitcoin could go up 11%, you'd realize an 11% gain on the investment. Because the call spread expired in the money. So it would finished above the floor that you struck the options on, up to that cap rate, which was 11%.

It had Bitcoin gone up 11%. The ETF would be up 11% right now with about two days left in the outcome period. If Bitcoin went up 20%, you would be up 11% because you hit your cap, but you can do no better than that cap rate. That's how the options package is constructed. Bitcoin is down 15%, here I'm looking at it right now.

It's down about 15% since day one of the outcome period began almost a year ago. Well, the ETF's going to be down about the expense ratio, 69 basis points. Because with that strategy, 100% capital protect, everything now is sitting in T-bills and basically matures at par. That's your investment.

It's like if you bought it, ran it up to par, and you got back a hundred on the T bill exposure, the bitcoin options exposure is worthless. And so you don't own that anymore. So it's, just a way to own Bitcoin, but you protect yourself in a very definitive way on the downside. With these strategies, in year one of the outcome period, the exposure was to the one year T bill if things turned south on Bitcoin.

[00:14:00] Doug Heikkinen: How does the protection mechanism work in practice, particularly in terms of defining downside buffers while still maintaining meaningful upside participation?

[00:14:10] Hans Williams: The protection is simply that T bill exposure. So that treasury bill was in there on day one, added at 96 cents on the dollar, whatever that T bill yield was. And that's never moved from the portfolio. So that's riding, accreting up to par over the course of that one year period. That's your protection. The upside exposure, if it occurs, is the options strategy. So the at the money call on Bitcoin up to where we have to sell a call to finance everything back to zero, to basically be perfectly financed with it, you have to then sell that upside call but. The protection is there if, Bitcoin is negative at all, with that 100% capital protect Bitcoin ETF. So think of it like Bitcoin, the Bitcoin exposure is essentially no more if Bitcoin is negative at all, you're simply holding the bag of T-bills.

And the bag of T-bills, you know that we're holding it to the end. We're getting back par on that exposure. There's a 69 basis point fee associated with the strategy. So at the end of the day, right now, when you look at the total return aspect of CBOJ, which is our 100%. Capital Protect Bitcoin ETF. That's going to basically return about negative 69 basis point to the investor because Bitcoin's going to, looks like it's going to finish about negative 15% or so at the end of the outcome period, which is this Friday. You're protected by owning all T bills at this point and with this strategy basically getting you back up, your hundred dollars turning back into a hundred dollars with that 69 basis point expense ratio.

[00:15:44] Doug Heikkinen: What trade-offs should investors understand when using a protected Bitcoin ETF versus holding a spot Bitcoin or a traditional Bitcoin ETF outright?

[00:15:55] Hans Williams: If you own a spot Bitcoin ETF, as you hold it, you are going to realize all of the upside that it delivers over your holding period. Bitcoin goes from, it's essentially at $90,000 right now, a coin. If it goes up to $180,000 a coin at the end of this year, you've essentially doubled your investment, right?

Spot bitcoin is most like our 20% capital risk ETF. That most recent October symbol is CBTO. CBTO has an upside cap rate of about 63% right now. So in other words, Bitcoin could go up and you'd realize 63% of that up move. And then anything above 63, you don't. You stop participating.

So if Bitcoin goes to $180,000 a coin over the next year, you would've done better owning Spot Bitcoin over our 80% capital Protect October ETF, Bitcoin ETF. The downside is if SPOT Bitcoin goes down to $45,000 a coin, you're on the hook for, you're exposed to that entire down move. So your $100 will turn into $50 if you invest today.

With our 20% capital protect bitcoins. Remember, a hundred dollars on day one invested, worst case scenario returns $80. So if Bitcoin goes down by 50% Spot is going to turn your $100 into $50. With our 80% capital protect, $100, worst case scenario, turns into $80 by the end of the outcome period.

So it's just a trade off. What makes the most sense to you in terms of what is your holding period? What's your timeframe? Are you willing to risk, are you willing to take on unlimited downside with Bitcoin? Then if you're comfortable with that, go own spot Bitcoin. Because you're also then entitled to all the upside.

If you like owning or having exposure to Bitcoin and having a very specific level of downside risk. Then also very transparent upside potential because of the cap rate associated with it on the day you buy it. That's the trade off you're making in terms of do I wanna own spot Bitcoin or do I wanna own a Bitcoin option strategy?

That protects me on the down and then gives me upside to a specific percentage.

[00:18:21] Doug Heikkinen: That's very well explained. Thank you. Calamos has a long history in risk managed and outcome oriented strategies. How does that experience translate into managing protection and outcomes like a Bitcoin linked ETF structure?

[00:18:36] Hans Williams: Everything we've done here for almost 50 years has been risk managed centric. Whether we're talking equities, or fixed income, or Bitcoin, or convertibles. Everything inside of our package products has been very in touch with what level of risk are we willing to take on here with this specific type of product.

So we simply took this other asset in Bitcoin. We created a structure that parallels to all of our other mutual funds that we have here, ETFs, other wrappers that are also risk managed focus. So it's just taking something that's volatile. Creating a solution that creates a very specific outcome, very specific outcome focus, that really is no different than our other suites and sleeves we've had here over the last 48 years as an asset manager.

It just sort of aligns things with everything that we've adopted at this point.

[00:19:39] Doug Heikkinen: Let's talk about portfolio fit and advisor implementation. How are advisors typically incorporating protected Bitcoin ETFs in decline portfolios from position sizing to portfolio sleeve placement?

[00:19:54] Hans Williams: Yeah this is the interesting part.

So we have these three, we have three different flavors of structured protection Bitcoin. One is a 100% capital protect. You invest a hundred dollars. Worst case scenario, at the end of the outcome period, your $100 becomes a hundred dollars minus the 69 basis point fee if Bitcoin goes to, 50,000 a coin, for example. Then we have a 90% capital protect.

So in other words, your $100 in, you have 10% capital at risk, but the cap rate on that is going to be higher. Then the 100% capital protect cap rate, the 100% capital protect cap rate most recently is about 10%. The 90% capital protect has recently featured about a 25% upside cap rate. And then we have an 80% capital protect Bitcoin ETF suite.

That's 20% capital risk over the one year outcome period. That upside cap rate is more like 42% most recently. In terms of portfolio implementation, it's going to vary. Our 100% capital protect, we've seen clients actually use that alongside T bill short-term fix rate exposure. Because remember, these contracts are backed and clear through the options clearing corporation.

So when a hundred percent capital protect, meaning the worst case scenario, you're losing the 69 basis point expense ratio. That's very short term sort of cash like, but with the one year T bill today offering three ish, three and a quarter percent, this is almost, this is actually about three x that, that return, best case scenario.

So we've seen a lot of clients, investors, advisors, out of the gates liken our 100% capital protect to like short term fixed and cash, in terms of sourcing from that bucket or using inside that bucket alongside those assets. The 90% capital risk and the 80%, that's been more equity-like bucket exposure or alternatives sleeve.

There's obviously risk with those, right? Like the 10% capital risk, the S&P 500 this century, the average down year has been about negative 14%. If you do the average of the six or so down years, you're looking at about negative 14%. So we have, we've had some investors use our negative 10% or our 10% capital risk structure protection bitcoin ETF alongside like a S&P 500 ETF exposure, or an S&P 500 value exposure because you're matching the risk personalities.

Because if worst case, you're going to lose negative 10 or lose 10%. Do the equity markets perform sometimes negative 10% in a year? That can happen, right? So we see a lot of that going on. We also see using it instead of gold ETFs. So when gold has a down year, sometimes it could be around 10%, potentially sometimes more.

So we see some clients using using our 10% capital risk Bitcoin instead of a, like gold or a gold ETF. And then your upside is actually in some cases more meaningful than gold in terms of historical performance. Our negative 20% capital at risk Bitcoin ETFs that we offer here, it's almost more NASDAQ like in terms of risk level. The average down year this century for NASDAQ, the NASDAQ 100 is around 22.5%.

So we've had some clients look at that and say, if I use this alongside my favorite NASDAQ growth ETF, or favorite NASDAQ beta ETF, I am sort of matching the downside potential in a worst case year. And then best case, if my cap rate on this is 42%, if the NASDAQ's up, can the NASDAQ sometimes go up 30 to 40% in a year? Sure. And this is sort of matching that upside profile as well.

And meanwhile, I can use this alongside in my aggressive growth equity sleeve. So we've seen a lot of that early and a lot of what we've built, clients are still looking at and trying to figure out, where does this slot into my, the 3, 4, 5 portfolio sleeves that I have here. And again, it just depends on the structured protection Bitcoin, ETF that we've created. Because the 100% is very different, obviously from a risk standpoint than the 90% and 80% capital protected ETFs.

[00:24:34] Doug Heikkinen: What types of clients do you feel tend to benefit most from a protected Bitcoin allocation?

Whether it's conservative investors seeking first exposure or growth oriented investors looking to manage behavioral risk?

[00:24:49] Hans Williams: We've seen the conservatives migrate to our 100% capital protect. Just the idea of owning Bitcoin, having a trade seven days a week, but knowing that worst case scenario, you're simply losing the 69 basis point fee with about a 10% cap rate.

So we've seen the more conservative investors sort of move into that franchise. And then the more aggressive investors with the longer term time horizons, we've seen start to allocate to our, 90% and 80% capital protect Bitcoin ETFs because then the cap rates, are in the twenties, thirties, and 40% per year.

And so if Bitcoin really takes off, like it has over time, you know, sells off 30%, 40% and then moves higher to the tune of 50% to a 100% sometimes over the course of a single calendar year, to be able to capture 20%, 30%, 40% of that, for someone that then wants to compound that over time and also is in it to hold Bitcoin long term as an aggressive investor, I think that makes a lot of sense for someone like that. So it really depends on the end user, their risk tolerance and the type of structured protection Bitcoin ETF that they're looking at, that we offer.

[00:26:06] Doug Heikkinen: All right, last one for you.

Looking ahead, how do you see protected Bitcoin ETFs evolving as Bitcoin adoption increases and advisors become more sophisticated in how they allocate to these digital assets?

[00:26:20] Hans Williams: Yeah, we're seeing a lot of SPOT Bitcoin ETFs start to use our capital protect instead, or sometimes in some cases, alongside SPOT Bitcoin ETFs.

We're also seeing the buffer ETF users start to look at this because at the end of the day, these capital protect, defined outcome, that sort of started with the equity buffered ETFs five, seven, eight years ago. This is the same thing, just with a different asset inside of it, being Bitcoin.

whether you're a buffer ETF user or a spot Bitcoin, ETF user or a risk manager that is curious about Bitcoin but has never bought SPOT outright because the downside sometimes can be devastating. That's the third type of investor that we're starting to see kick the tires of this and figure out how do I use this long term. I like the transparency around both the upside and my downside most importantly.

[00:27:21] Doug Heikkinen: Hans great information for anybody interested in Bitcoin ETFs. Thank you so much for being with us today.

[00:27:29] Hans Williams: Thank you, Doug. Appreciate it.

[00:27:30] Doug Heikkinen: To learn more about Calamos, please visit Calamos.com. We are on all social media platforms @Advisorpedia. Please give us a follow. For our producer Tory Miller, and everyone at Advisorpedia, thank you so much for listening.