Hey there!
Let's say I was to quote a book by Cardinal Cardigan I've read for an essay. (This isn't an actual book, just an example). The book contains the following sentence:
The reason that flowers are so beautiful is that they come in a variety of colors and scents that are appealing to many people.
In order to quote this, I would use the following formatting:
"The reason that flowers are so beautiful," states Cardigan, "is that they come in a variety of colors and scents that are appealing to many people."
Using this, your answer will be your first option.
Hope this helped you out! :-)