Booyah Breakdown: Know Your Options

Editor's note: Welcome to "Booyah Breakdown," an explanation of 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.

Most professions have their own lingo. An accountant talks debits and credits, a lawyer strings archaic words together -- "herewithin, theretofore" -- and Cramer says things like "'mon back" and "pin action."

Options traders have their vernacular as well. And Cramer often talks about using options to hedge his bets. So if your ultimate goal is to emulate skeedaddy, you better learn the language of options because Cramer uses the jargon.

In his Sept. 13 Columnist Conversation on RealMoney.com, when talking about Goldman Sachs (GS Quote), Cramer recommended the "GS 155 and 160 calls."

Huh?

And then Devon (DVN Quote) came up in the Aug. 22 Columnist Conversation, and he said that someone noted that the "the Devon puts are even more active than the calls."

Is that a good thing?

So you need to understand this language if you're going to follow The Big Man. And that lingo is what we're going to tackle today. So consider this Part 1 of your options education. Part 2 comes next week, when we will dive into some great ways to use these things.

What Are My Options?

Options are a lot like insurance. "We can't pull the car out of the driveway without car insurance, yet we can walk around with 100 shares of IBM , no questions asked," says Marty Kearney, senior staff instructor at the Chicago Board Options Exchange's Options Institute.