Bitcoin Contango and questions about CME

Quoting from [Wikipedia!]( Contango is a situation where the futures price (or forward price) of a commodity is higher than the expected spot price of the contract at maturity.

CME is the Chicago Mercantile Exchange which is the huge regulated marketplace for futures and options for commodities. Bitcoin is one of their commodities.

I’m a complete noob at Futures. For something like peanuts, a farmer might enter into a Futures contract where she agrees to deliver a ton of peanuts 6 months from now, for which she will receive the Future price which was set now.

On CME, their bitcoin FAQ says the futures are settled financially, not with actual Bitcoin. The current December 2021 Future price (as of Friday 4/9) was 62,400. So does that mean that if you sold 1 contract you would receive 62,400 but you would deliver the spot price of bitcoin in December to them, so you would net 62,400-$bitcoin(december)?

That’s obviously super volatile so the way to remove the volatility is to buy a bitcoin today and plan on selling it in December. That basically guarantees something like 15% annual Return! That’s Contango!

I’m a hodler but I’m interested in the mechanics of this trade and I’m fascinated by the fact that this hasn’t been arbitraged away.

Any insights into CME settlements and Contango welcomed. Thank you.

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