Answer:
It's the second option!
Step-by-step explanation:
The narrator is clearly nervous, as he "had been and am".
The narrator certainly isn't a very insane person, he's approaching the others in the story with logic and reasoning instead of furiosity and craziness!
So, this puts the 2nd choice (The narrator doesn't believe he is insane, even though other people think he is ) as the answer! :)