How Can a Miner Hedge against the Risk of Unexpected Difficulty Increases Using Financial Derivatives?

Hedging against an unexpected difficulty increase is complex as there is no direct derivative product. However, a miner could use an option strategy based on Bitcoin's price.

Since a difficulty increase usually correlates with a healthy price and increased competition, a miner could purchase Put options to protect against the scenario where the price does not rise enough to offset the increased difficulty, thus locking in a minimum selling price.