Betting on the highly improbable paid off for invesotrs in one hedge fund last month.

Universa Investments, the $2 billion hedge fund founded by New York University risk engineering professor Nassim Nicholas Taleb, did something that seems impossible for funds that keep 90% of their assets in cash: post triple-digit returns. The firm's Black Swan Protection Protocol funds made between 65% and 115% last month, according to The Wall Street Journal.

How? Taleb's strategy of buying way out-of-the-money put options—in this case, on American International Group, which was effectively nationalized in September. In July, Universa bought AIG options that would pay off if the stock fell below $25 for $1.29 each. AIG, which traded at $26 in July, sunk below the magic number in early August before completely collapsing in September before the government bailout. Universa eventually sold its puts for $21 apiece.

Universa also benefitted from betting against the Standard & Poor's 500 Index in late September, buying options that would pay off if the index fell to 850 by the end of last month. By Oct. 10, when the S&P 500 had fallen below 900, the options were selling for $60 each.

Taleb, whose book The Black Swan discusses the effect of highly improbable events on financial markets, consults for Santa Monica, Calif.-based Universa, which is run by Mark Spitznagel.