Does the seller side has to have the bitcoins when the contract is made?
No. That's the whole idea behind "regulated" bitcoin markets. You don't need to have a single satoshi to sell thousands of bitcoins and suppress price.
Bankers think that bitcoin ETFs will solve bitcoin supply "problem".
When the contract expires seller has to anyway have to get the coins from somewhere to be able to sell them to the buyer?
Nope. Actual delivery of bitcoins is forbidden. Just like in gold futures and ETFs. At the expiry date profit/loss is cleared through the seller's margin deposit which is in dollars. If the seller is systemically important bank and they did the wrong bet Fed will print new dollars and will give them to pay for their loss.