LTCM's main strategy was to make convergence trades. These trades involved finding securities that were mispriced relative to one another, taking long positions in the cheap ones and short positions in the rich ones. There were four main types of trade:
Convergence among U.S., Japan, and European sovereign bonds;
Convergence among European sovereign bonds;
Convergence between on-the-run and off-the-run U.S. government bonds;
Long positions in emerging markets sovereigns, hedged back to dollars.