What was the main trading strategy blamed for intensifying the 1987 stock-market crash?

Portfolio insurance was the main trading strategy blamed for intensifying the 1987 stock-market crash.

Portfolio insurance used computerized rules to sell stock-index futures as markets declined. The intended goal was to limit losses in an equity portfolio, but many strategies responded to falling prices by generating additional sell orders. In a rapidly declining market, those orders could reinforce downward momentum.

Researchers and officials also identified other contributing factors, including overvalued equities, international market tensions, liquidity problems, and the growing use of automated trading techniques. Portfolio insurance was therefore an important mechanism discussed after the crash, not a complete single-cause explanation.

The episode helped change views about market infrastructure. Regulators and exchanges introduced coordinated trading halts, commonly called circuit breakers, to give participants time to assess extreme price movements. These safeguards were later revised as markets and technology changed.