Note that Option #2 also requires you to keep track of the old password and expire the new random password if it isn't used within, say 24 hours.
Otherwise I could annoy you by repeatedly issuing you a new random password -- if you are not near your email you might not know why you cannot log in with your normal password.
Also, please avoid requiring an "identification question". The answers to these questions are typically much easier to guess/lookup than real passwords -- so everybody can identify themselves as me. See the Sarah Palin story for a recent example of how insecure this is.