So u are talking about a $0.10 options becoming $5 or $0.20 becoming $10 hence the 5000%.
#1
Problem is would u have bet everything on that 10 or 20c options ? Chances are you wouldn't maybe u took 5-10% of ue entire pot to bet on it. So its more of like a 50x ur 10% pot, which means u only made abt 100% to 150%. ok thats... not alot assuming u had $50,000 of trading acct and it became $75k. So what? Would u lose for the rest of 2013.
#2
What if MSFT did not move by 10%, maybe just 5% or 6%. Then that 10c options might only be $2-3 for eg. (depending on its delta.) which is only 20-30 %. Ok u said fine, u still made money.
#3
So how do u really decide to bet on a 1 sided direction, which is for it to fall ? Maybe u ran a straddle, and u have to account for the loses u bet on Call options as well.
#4
Strike price. U need to really buy the right OTM Puts, for 10c to become $5. If u had already bought a delta 0.8 ITM option say at $3. U might ended up with a $7-$8, which means only a $100%-200% gain.
$5
If the entire markets knows its gonna fall (hedge funds buying insurance) the premiums shld have gone up already. Again, 5000% ? I don't see how u can get it right for the rest of the 1000 stocks ?
