You could buy 10 year government notes and lock in >4%. I would guess a reliable way of generating low but steady returns with options would be selling far OTM index prem with low leverage. Seems like a risky way to make a few hundred BP's though. You could also look into buying low beta, high dividend stocks and putting collars on them, or just overwriting, or maybe selling multiple call verticals and buying puts.
No arbs are w/o risk until they're locked. You stated previously that credit long flies and time spreads aren't riskless. They are, but no entity will quote a riskless position for you, at least intentionally. I believe you were unaware of the arbitrage condition related to a long fly and long time spread done at a credit, which causes confusion. So in the above (boldface) context, there is no such animal as arbitrage. Take a local marketmaker as an example. The MM sells a call at a large initial edge... buys a put at something over parity, a price that allows for a synth-short > current spot + carry. The MM still has execution-risk on his spot-long to lock in the conversion-arbitrage. The MM has intra/intermarket execution risk just as the retail trader, but his edge is such that he has greater variance with which to operate.
Or as someone may have mentioned; buy a zero and use the discount to trade whatever you like. When you blow the $$, roll over until the urge passes to trade anymore.
What I am looking to find is something that is a low risk, low return, high probability trade that earns a little more than the risk free rate. Obviously I know that I can just risk less (i.e. putting 90% in bonds), but that is not what I am looking for. Selling OTM prem is high probability, but also high risk for low reward. Putting collars on dividend stocks may not even work, and there is the risk of the stock being called away. I am not sure what you mean when you say overwriting. As far as selling call verticals and buying vertical put spreads, I though that they are fungible? Does anyone here even know what position a retail trader could put on just to earn the risk free rate?
sell a "cover call' on the 5 Y Treasury Note. Figure out the the ratio ( a bit complex). This will work at the best in you can obligate to add new money into account month after month
riskarb & others, Is the IV smile a tradeable edge, a model weakness, other opinions? Opening a delta neutral position that takes advantage of it, i.e. a call backspread, does it offer an edge? I prefer to have the IV smile on my side, but I tend to believe that it is a model weakness.
The edge in smiles is illusionary at best. The smile is pricing in an event that will happen sooner or later over a long series of trades. Sooner or later, the 00 comes up on the roulette wheel. Game over.
Dividend capture. And no, I'm not going to walk anyone through it. It becomes completely diluted with added players.