When we roll an option for credit, we improve our break-even price. Does that mean that we can eventually close an ITM position for a profit, if we roll enough times?
- For example, I sell a put in a $10 stock for $1.
- The stock drops to $9, so I roll out the next month, collecting another $.50.
- I've now collected $.50 more than the intrinsic value of the option.
As the extrinsic value evaporates, it should be possible to close the position for a profit, even though it's still in the money. (assuming the price doesn't change) Is this correct?