Listening to investing practitioners and pundits talk, the lay person might get the impression that investing is a rational application of microeconomics and mathematical principles.

This impression is false.

The truth is that investing is as fad driven as a junior high school playground.

One fad that unsurprisingly gained some traction in the immediate aftermath of the financial crisis was that of “Black Swan” funds. These funds, prompted by interest in the popular investment writer and pundit Nassim Taleb’s book, sound like great ideas in theory.

In theory, a Black Swan fund takes advantage of the observation that there are relatively more extreme events than described by a statistically “Normal” distribution. For example, the Black Monday crash of 1987 was a 22-standard deviation event – something that should happen on the order of once in 11 billion years of trading if market returns were Normally distributed.

Black Swan funds spend a certain amount of capital each year – let’s say 10% of the portfolio value – to buy far Out-of-the-Money options on assets that the portfolio manager believes ripe for an extremely unlikely, black swan event.

Presumably, the black swan fund manager is better at assessing the possibility of the occurrence of extremely unlikely financial events than the collected intelligence of the option market. Another implicit assumption is that black swan events must occur at least once every 10 years (assuming the fund’s mandate is to invest 10% each year).

The latter assumption is relatively easier to swallow than the former; even though there has not been an extreme drop in the US equity market since 2008-2009, there are numerous markets around the world that have experienced larger than normal disruptions, as any recent investor in the Turkish lira would testify.

Even if one could get past the theoretical difficulties, there are practical issues that make the concept of a black swan fund difficult to implement. Specifically, far Out-of-the-Money options on most underlying assets are more or less illiquid. If one’s fund is relatively large, it would be difficult to make transactions large enough to generate sufficient returns to the portfolio.

Another practical issue is figuring out when you should take profit on the option position. If one does not have a fundamental view on the value of the underlying security, it’s hard to know whether it’s time to take profits or not.

I learned this lesson firsthand when I noticed that in the lead up to the Brexit vote that options on the S&P 500 index seemed to be priced too cheap.

Indeed, the surprising Brexit vote results came out after the market closed and the following day, the market dropped heavily. I closed half my position at a 100% gain, figuring I would leave half the position open in case the market kept falling the next day. The market bounced back the next day and because my options were short-tenor and still far Out-of-the-Money, their value fell precipitously. Unable to exit the position, I suffered a 100% loss on the second half of my allocation.

You do the math. +100% on day one with 50% of the allocation and -100% on day two with another 50% of the allocation. I would have been just as well off if I had slept through two entire trading days.

Considering these theoretical and practical issues, black swan funds have had the staying power of an 80s boy band.

So my ears perked up when, at an investing conference I recently attended – the Latticework Conference, sponsored by the Manual of IdeasMurray Stahl, the CIO and co-founder of Horizon Kinetics and an extremely creative, fundamentally contrarian value investor mentioned his using options to boost returns from a bond portfolio.

Asking him about his strategy after his presentation, he told me that his idea was to invest in some attractive, high quality corporate bond and to invest each of the coupon payments in Out-of-the-Money options. The options in which he would invest were unrelated to the bond in which he was investing. For example, he might own the bonds of Walmart WMT and use coupons from the Walmart bond to buy OTM puts and calls on Tesla TSLA.

In the worst case, his options would expire worthless and he would end up losing one coupon payment. In the best case, his profit on the option contracts might be multiples of the amount of a single coupon.

This strategy struck me as the first sensible and practical approach to black swan investing – though Stahl himself may not think of it in these terms.

The most attractive feature is that unlike a black swan fund, in Stahl’s strategy, his clients’ principal is preserved. There is an opportunity cost in investing the coupons in the option market since his clients don’t have access to the coupon proceeds. However, as long as a few of the option investments work out, the opportunity cost may be offset; if the option investments work out with any regularity, Stahl effectively boosts the interest rate earned on the underlying bonds, so his investors wind up ahead.

They say that imitation is the greatest complement, so I am going to complement Stahl by testing this strategy in my own and my clients’ portfolios. I don’t know yet what the results will be, of course, and the logistics of this might end up being too onerous for me to continue, but it’s a creative idea and worth spending a bit of time and money on!