Which 1987 trading strategy was blamed for amplifying selling during the Black Monday stock-market crash?

Portfolio insurance was the 1987 trading strategy blamed for amplifying selling during the Black Monday stock-market crash.

Portfolio insurance used computer models to adjust futures positions as markets declined. The strategy was intended to limit losses, but many programs generated additional sell orders during a rapid fall, potentially adding pressure to an already unstable market.

On October 19, 1987, the Dow Jones Industrial Average dropped 22.6%. Trading links between stock and futures markets, limited liquidity, and investor anxiety made it difficult for buyers to absorb the volume of orders.

Economists continue to debate how much portfolio insurance caused the crash, because no single factor explains the worldwide decline. Index arbitrage also mattered, but it was a different strategy involving price differences between stock-index futures and the underlying shares. Afterward, regulators introduced coordinated trading halts and circuit breakers.