Behind the short sale fuss
The SEC has halted short sales on 799 financial companies. Why so?
Well with short sales, profits are made when stock prices drop and instead of waiting for a decline, some people have tried to cause the decline. A short sale allows you to reverse the traditional buy-low, sell-high trade with sell-high, buyback-low. You borrow shares from another investor, sell the shares at a high price and then replace the shares at a cheaper price once the stock drops. The lower the better.
This is perfectly legal and frequently practiced (well, until now). No word on when the temporary ban will be lifted.
Tags: financial stocks, sec, short sale banRelated Stories
POSTED IN: Corporate, Economy, Federal Reserve, Investment, Market, News
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