Thank you guys for the replies. I now understand this more clearly.
I want to understand why it is not as below though ( I am with IB btw)
1000 UL is at 960,
1000 put is 40 bux
950 call is sold at 15 bux
now,
when the UL goes to 960, why not:
1. exercise the call at 950 to sell the UL at...