I go with #1. I've been to airports where the difference between the CAT 1 & CAT 2/3 holding points is less than half the length of my a/c. B738. The amber/green lights reverted to green when vacating across the CAT 2/3 holding point. Thus my tail was still inside even the CAT 1 holding point. From this I assumed it was a requirement for the crew to assess when they were totally inside the protective area.