What trading strategy is widely cited as worsening the Black Monday stock-market crash of 1987?

Portfolio insurance is widely cited as worsening the Black Monday stock-market crash of 1987.

The strategy used computer-based rules to reduce exposure to falling markets, often by selling stock-index futures as prices declined. Those sales could reinforce downward momentum, particularly when many investors followed similar models at the same time.

On October 19, 1987, the Dow Jones Industrial Average fell 22.6%, the largest one-day percentage decline in its history. The selling spread rapidly among international markets, although the crash was not caused by one universally accepted factor. Concerns about interest rates, trade deficits, market valuations, and trading-system pressures also played roles.

Portfolio insurance did not literally insure investors against every loss. It was a dynamic hedging technique, and its use became a major subject of later investigations into market structure and automated trading.