Index options-only hedging consists of writing ATM/OTM calls and puts and maintaining delta neutrality of the positions by hedging using options alone

Source of performance
Capturing the premium disparity on options on account of realized volatility versus the implied volatility

Process

1. Identify index historical realized volatility
2. Calculate implied volatility for ATM/OTM strike
3. Write calls and puts simultaneously
4. Capture the implied-realized volatility arbitrage
5. Manage delta-neutrality dynamically
6. Exploit implied volatility arbitrage & decay profit

Main sources of riskss
Liquidity, Volatility, Leverage (Fat Tail), Pricing