Option C, 'in which,' is the correct answer because it provides a grammatically correct relative clause that refers back to 'Strand Magazine.'
The correct answer to the question is option C: in which. This option corrects the grammatical mistake in the original sentence by replacing (being the place in which) with in which, leading to a sentence that reads smoothly and clearly: "He then wrote an enthusiastic article for Strand Magazine, in which most of his Sherlock Holmes stories had first appeared, and later wrote a book on the subject titled The Coming of the Fairies."
In this sentence, in which is a relative pronoun that refers back to 'Strand Magazine' and introduces the relative clause, giving additional information about the magazine.