Actually, I know a guy who trades smaller ETFs (less liquid) as well ETFs that involve non-traditional assets or have incomplete holdings. It's a bit more statistical and requires a lot of work, but there is definitely money there.
about 10 years ago I was part of a two person team that surprisingly made some money doing this with a liquid ETF (penny wide quote) and illiquid constituents (sometimes 50 cents wide). I was a bit amazed it worked.
Don't you have to be an authorized participant to create/redeem? Or is this guy warehousing the arb and then waiting for prices to swing in other direction (from NAV discount to premium or vice versa) to unwind?
The latter - essentially waiting for the authorized participants to push the price in their direction.