Yes you limit your upside but what I do is I work backwards. I pick the level where I think the stock will go to (say $1105 on PCLN) and then I decide where I want to buy my long options. The chances of PCLN going to $900 in that time frame are slim and none. When you play options you have to have realistic expectations. If you shoot for pie in the sky you will be a loser. If you have realistic expectations you can learn to consistently make money. Take this example I bought PCLN $1125 puts when it was trading at $1175ish I bought them a week and a half before OPEX. With a market that I thought was going to tank I thought that a $75 move was reasonable in that time frame. More was possible but I thought it would have decent support at $1100. With the stock moving up and down a few times I was able to get my cost down to around $4.35 or so then the stock tanked and I sold $1105s against them creating a spread with a .50 credit. Using my strategy if the stock went to where I thought within $5-10 either way my strategy makes more sense. If I max out I make $20 per spread plus the .50 I made with zero risk and I have another $4000 to play with. I'm good with infinity baggers after taking my risk off. In your scenario if you got your cost to $4.35 and the stock went to $1100 you'd get $25 plus a little premium giving you about a 5 Bagger. Now let's say you were looking for your pie in the sky scenario by the time you realized it had bottomed it would have bounced $10-$15 in the blink of an eye and you would then only have a double or triple.
If you go in with reasonable expectations and play accordingly you will be more successful
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