In the context of risk management and strategic financial planning, companies often engage in various practices to manage their exposure to market fluctuations. One common tool utilized in this regard is derivatives. Consider the following situations where derivatives may be employed:

1. A manufacturing firm expects to receive a large payment in euros from a client in six months but is concerned that a strengthening dollar could reduce the value of that payment when converted to dollars.

2. An investor holds a substantial position in a volatile tech stock and wants to protect their investment against potential short-term losses without liquidating their position.

3. A farmer anticipates that bad weather will reduce the yield of his crop and fears that current prices are low and may fall even further.

Which of these situations illustrates the proper use of derivatives for hedging purposes?