The Ironless Inductive Position Sensor (I2PS) is an air-cored displacement sensor which has been conceived to be totally immune to external DC/slowly-varying magnetic fields. It can thus be used as a valid alternative to Linear Variable Differential Transformers (LVDTs), which can show a position error in magnetic environments. In addition, since it retains the excellent properties of LVDTs, the I2PS can be used in harsh environments, such as nuclear plants, plasma control and particle accelerators. This paper focuses on the design optimization of the sensor, considering the CERN LHC Collimators as application. In particular, the optimization comes after a complete review of the electromagnetic and thermal modeling of the sensor, as well as the proper choice of the reading technique. The design optimization stage is firmly based on these preliminary steps. Therefore, the paper summarises the sensor's complete development, from its modeling to its actual implementation. A set of experimental measurements demonstrates the sensor's performances to be those expected in the design phase.