For example, Company A in China is engaged in export trade, and it is expected to receive the payment of 1 10,000 USD in three months.

However, Company A settled its profit and loss in RMB. If the dollar depreciates within three months, Company A will suffer losses. Therefore, Company A will short 1 three-month RMB futures contract. If the dollar really depreciates, Company A will profit from the futures contract, and this profit just makes up for the loss in trade. On the contrary, if the dollar appreciates, the profit in trade will just offset the loss in futures.

This is called hedging operation.