I think he means "of the ETFs which use futures contracts to replicate an index, which currently buy/roll underlying futures that currently have the steepest contango - I want to short the ETF and harvest the negative carry." VXX is a popular short, but the borrow costs to short may negate the yield from capturing the roll. This is most likely the case for all futures-based ETFs.
You got my point. Is it true that only ETFs that track futures contracts have contango? So when I said contango, it must means ETFs that track futures. I don't understand "borrow cost", I saw many people short VXX and UVXY with IB accounts. If by borrow cost you meant margin interest, then UVXY monthly contango is above 10%, so margin interest is not a problem. By the way, I found out the hightest contango ETF is UVXY.
UVXY is the near VIX futures trust. It has an upside skew and therefore a "contango" over cash VIX. There is no arb there... any more so than shorting OTM index puts is an arb.
It is not arb. Just risk and reward. For the same risk, shorting UVXY can double what you get from shorting OTM index puts.
Moneyness, so they are not remotely fungible, and you have no spread here. What's the edge on UVXY over VX? How much cash is the fund holding? The fund trades... there is no SET, no expiration. The UVXY is a blended-expiration, IIRC.