What was the name of the automated trading strategy often blamed for worsening the 1987 Black Monday crash?

Portfolio insurance was the automated trading strategy often blamed for worsening the 1987 Black Monday crash.

Portfolio insurance was designed to limit losses by automatically selling stock-index futures as markets declined. The strategy was intended to create a synthetic protective put, allowing institutions to reduce equity exposure without purchasing traditional options. In a rapidly falling market, however, many programs could issue similar sell orders at the same time.

On October 19, 1987, the resulting selling pressure interacted with other forces, including index arbitrage and investor fear. As prices dropped, rules within some strategies called for still more selling, creating a feedback loop. Scholars continue to debate how much responsibility portfolio insurance deserves compared with broader macroeconomic and market-structure factors.

Program trading is a wider term for computer-assisted buying and selling, so it is related but less precise. Portfolio insurance is the specific strategy most often associated with the crash’s mechanical amplification.