After expiry, futures exchanges can either offer the delivery of the underlying asset (i.e. physical delivery) or allow the trader to settle her position through cash (i.e. cash settlement).
Contango offers physical delivery as this process is not vulnerable to price manipulation. This is because cash settled futures are settled against an index that normally relies on third-party spot markets where sometimes volumes are thin and can be moved - read: manipulated - very easily (source: Coinflex).
How does it work?
Due to the nature of Contango and how it uses the trader's margin, at expiry she needs to bring the missing capital to make up for the difference in the debt she owes.
That means that, if she's long ETHUSDC, she will receive ETH at expiry. If she’s short, she’ll have to deliver ETH - which means she’ll be receiving USDC.
Let’s go through the two examples:
A trader can close her position earlier, before expiry and thus crystallise her PnL. No extra steps are required on her side: the protocol will simply revert the transactions carried out to open the position, as explained in the position closing section.