This strategy largely consists of shorting a leveraged ETF and counteracting the exposure using futures.

Theoretically, leveraged ETFs suffer froma a "volatility penalty" in flat markets (e.g. 30% up 30% down is worse than 10% up 10% down)

In a second order Taylor approximation it is possible to show that the difference between future and leveraged ETF returns is equal to:

$\frac{\beta^2-\beta}{2}((\sum_{i=1}^{N}{{R_i}^2})-R^2)$

Given typical volatility, the leveraged ETF will underperform the futures by ~10% yearly in flat markets

Options are used to hedge the tail risks