Option 2 is to use dropcloths and staples (or wide masking tape) to create a "workbooth" that will trap all of the chips.
(I would recommend using duct tape to reinforce the plastic before stapling it, btw).
I've done this in my garage to keep from getting sawdust and spray paint all over my wife's stuff out there.
When you are finally all done, you can just pull the staples out of the ceiling, roll it all into a ball, and stuff it in a yard/leaf size garbage sack.
You will probably still make a little mess outside the booth, but not anywhere near what you do without it.
Another big help is to rig up a shop vac to your router to suck out as many chips before they get all over as possible.
I would put the vacuum part outside the booth, and just run the hose in.
And be sure to wear eye protection and a dust mask while working in a space that small.