What term describes the 1987 crash’s computer-driven rapid selling strategy?

Portfolio insurance describes the computer-driven rapid selling strategy associated with the 1987 crash.

Portfolio insurance was designed to limit losses by selling stock-index futures as markets declined. The strategy aimed to create a synthetic put-protection effect without requiring investors to buy traditional put options. In a rapidly falling market, however, many similar rules could generate additional sell orders at the same time.

During Black Monday, October 19, 1987, this feedback mechanism was widely blamed for intensifying selling. It was not the only factor: valuation concerns, interest-rate movements, currency tensions, and market structure also mattered.

The term should not be confused with ordinary insurance or with a margin call. A margin call occurs when a broker requires more collateral from a leveraged investor. Portfolio insurance was an investment strategy, and its role in the crash helped inspire later circuit breakers and other market safeguards.