The SEC has temporarily banned short selling of 799 financial stocks.
Maybe you don’t know what short selling is. Here’s the funny explanation first:
Now here’s the not so funny explanation.
Essentially, buying a stock is betting the price will go up. Short selling is selling shares you don’t actually have, betting the price will go down, and you can “buy to cover” later. One thing to remember: when you buy, you can only lose as much as you spent but your gains are theoretically limitless; when you sell short, you can lose a theoretically infinite amount of money, but your gains are limited. This is not a strategy for Joe and Jane Average.
It remains to be seen whether this will actually help the financial stocks in question. Some people do think it’s a bad idea and there were other ways to solve the problem.