Short Selling Returns to Wall Street

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CBNNews.com - Another source of uncertainty on Wall Street has to do with something known as short selling.

Here's how it works: investors can legally bet that certain stocks will fail.

"Basically you make money if a stock goes down. You sell the stock before you buy it," CBN News Financial Analyst explained, admitting the bet is complicated. "So if you short a stock at $10 and it goes to $5, you have made $5 dollars."

Short-selling had been a common practice in hedge funds until two weeks ago when the Securities and Exchange Commission put a temporary ban on the practice.

But that ban expired today, and short selling has resumed. Financial analysts disagree if this will cause more turmoil in the stock markets.

The practice is considered risky because prices can rise indefinitely, even beyond the net worth of the short seller.

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