StockCram LogoStockCram
Appearance

Black Monday 1987 worksheet and answer key

For grades 9 to 12 (ages 14 to 18), in one 30-minute period. Students play the Black Monday 1987 simulator and answer the first part as they go. The lesson plan and discussion questions are on the game page.

Black Monday 1987: student worksheet

Name
Date

Play at stockcram.com/tools/stock-market-game/1987-black-monday. You get pretend money and only the news people had each day. When the game stops at one of the moments below, answer before you continue.

S&P 500:
an index that tracks the share prices of 500 large US companies.
Stock-index futures:
contracts to buy or sell an index at a set price on a future date.
Portfolio insurance:
a strategy big funds used in 1987 that sold index futures automatically as prices fell.
Circuit breaker:
a rule that pauses trading across the whole market after a very large fall.

While you play

  1. At “Stocks end the week down 9%, after a 5% drop on Friday”What did you choose, and what did you expect Monday to bring?
  2. At “Black Monday: the S&P 500 falls 20.5% in one day”What did you choose? What made this decision hard?
  3. At “The Fed offers support, and stocks rise 5.3%”Did the Federal Reserve’s statement change what you chose? Why or why not?
  4. At “Six weeks on, a new closing low”How far below the August record is the market now? Is that more or less than on Black Monday?
  5. At “A year on, back to the Friday before the crash”Write down your balance. How do you feel about the choices you have made so far?
  6. At the end screenWhat was your final balance? What would it have been if you had changed nothing? The end screen shows both.

After you play

  1. Black Monday was the worst day, but it was not the lowest close. When was the lowest close, and what happened in between?
  2. Portfolio insurance sold stock-index futures as prices fell. Explain how that could push prices down further.
  3. The S&P 500 ended 1987 about level with where it started. Why does that number hide what happened during the year?
  4. How long did it take the S&P 500 to close above its August 1987 record again?
  5. Exit ticketName one thing people on October 19, 1987 could not have known, and one choice in your run you would explain differently now.

StockCram Market Rewind, stockcram.com/tools/stock-market-game/1987-black-monday. Educational simulation with pretend money, not investment advice. CC BY-NC 4.0: free to copy and share with credit, not for sale.

Black Monday 1987: teacher answer key

Figures are the closing levels of the S&P 500 that the game uses, prices only. Questions about a student's own choices have no single right answer; the notes say what really happened next.

  1. What did you choose, and what did you expect Monday to bring?On Monday, October 19 the S&P 500 fell 20.5% to 224.84, still its biggest one-day fall. Nobody that weekend knew it was coming.
  2. What did you choose? What made this decision hard?The next day the market rose 5.3%, and by Wednesday it was about 15% above Monday’s close. On the day itself the ticker ran hours late, so many people deciding did not know their prices.
  3. Did the Federal Reserve’s statement change what you chose? Why or why not?Prices kept swinging. On October 26 the S&P 500 fell another 8.3% in a day, and most of the rebound was gone.
  4. How far below the August record is the market now? Is that more or less than on Black Monday?The close of 223.92 on December 4, 1987 was about 33.5% below the August record of 336.77, and slightly below the Black Monday close. The lowest close came seven weeks after the crash, not on the day.
  5. Write down your balance. How do you feel about the choices you have made so far?No single right answer. The market was back at its level of Friday, October 16, 1987 and still 16% below the August record. Nobody could say when it would get back.
  6. What was your final balance? What would it have been if you had changed nothing? The end screen shows both.It depends on each run. The S&P 500 first closed above its August 1987 record on July 26, 1989, 21 months after the crash.
  7. Black Monday was the worst day, but it was not the lowest close. When was the lowest close, and what happened in between?December 4, 1987 (223.92). Prices bounced after the crash, fell 8.3% again on October 26, and drifted lower into December. One terrible day did not mark the bottom.
  8. Portfolio insurance sold stock-index futures as prices fell. Explain how that could push prices down further.Falling prices made the strategy sell, the selling pushed prices lower, and lower prices made it sell again. The presidential task force that studied the crash (the Brady report, January 1988) pointed to this kind of selling as one reason the fall was so large. Market-wide trading halts, called circuit breakers, were introduced the following year.
  9. The S&P 500 ended 1987 about level with where it started. Why does that number hide what happened during the year?It rose about 37% from January to the August record, then fell about 33% to the December low. The start and end of the year match, but the path between was extreme.
  10. How long did it take the S&P 500 to close above its August 1987 record again?Until July 26, 1989, 21 months after the crash, counting prices only. With dividends reinvested it got back about two months sooner.

StockCram Market Rewind, stockcram.com/tools/stock-market-game/1987-black-monday. Historical data is shown for teaching; past performance does not indicate future results. CC BY-NC 4.0.