Booyah Breakdown: Looking Into the Futures

Editor's note: Welcome to "Booyah Breakdown," an explanation of certain terms and topics Jim Cramer discusses on his "Mad Money" TV show. Feel free to ask a question if you're confused about something Cramer talks about, but please keep in mind that we do not provide advice on specific stocks.

You wake up, turn on CNBC, and the first thing you hear is a talking head reporting on the futures market.

But it's so early, you're still trying to get yourself into the present, never mind the future. So you're not really sure if they're talking about stocks or space travel.

Of course, after you blink your eyes a few times and have a cup of coffee, you realize they're talking about the overnight futures market. And morning TV is not the only place where you hear about this stuff lately. Pundits refer to the futures markets all the time, especially since recent hot commodities -- such as oil and corn -- are directly tied to them.

While he may not discuss futures much on "Mad Money," Jim Cramer has frequently noted the futures market on his RealMoney blog in reference to investment decisions. Many of you have noticed Cramer's mentions of the futures market but wrote in looking for more guidance.

So today we're going to give the futures market the good ol' Booyah Breakdown, because you can gather a ton of information just by watching and understanding it.

Of course, you can trade futures contracts and use them as hedges against your portfolio. Tons of people do. There's more dollar trading volume in S&P futures than in all the stocks in the NYSE combined, says Rick Redding, managing director for the Chicago Mercantile Exchange's products and services. But trading futures can get pretty technical -- and risky -- so we'll save that for another today.

Today we'll focus on what you can learn just by recognizing the different movements in the futures market.

To watch Tracy Byrnes' video take of this column, click here.

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