Why the stock market suffered its worst single-day collapse in 1987

In the autumn of 1987, global financial markets experienced their first truly interconnected crisis. This video examines the mechanics behind Black Monday, exploring how automated trading strategies and risk management tools triggered a historic, rapid decline in equity values.

On Black Monday, the Dow Jones Industrial Average experienced a 22.6 percent drop during one session. This event stands as the most significant single-day percentage loss in the history of the American stock market, representing the most severe downturn since the Great Depression era.

The collapse was driven by specific financial innovations of the time, namely program trading and portfolio insurance. These mechanisms created a feedback loop that accelerated the sell-off, fundamentally altering how global exchanges operate and manage systemic risk to this day.

Source: The 1987 Crash