The hedge fund Long Term Capital Management (LTCM) made large losses in the late 1990s and was rescued by a consortium of banks. Explain to your boss, the analysis behind ONE trading strategy adopted by LTCM, which contributed to its demise.

Assume your boss knows some basic finance (e.g. futures and options pricing, hedging, leverage, arbitrage, speculation etc), so your boss is mainly interested in the analytic steps in your explanation (and not on the historical narrative). You may use illustrative diagrams/numbers/figures to illuminate the steps in your analysis.