Currency Management Strategy Effectiveness

Sunshine Asset Management is evaluating its portfolio for potential exposure to foreign currency risk. The firm holds a substantial amount of securities denominated in euros, and the portfolio manager is considering implementing a currency management strategy to hedge against potential euro depreciation. The manager is presented with three options:

1. A direct hedge by entering into a forward contract to sell euros for U.S. dollars.

2. Investing in U.S. government bonds to create a natural hedge against euro-denominated assets.

3. Purchasing options on the euro to limit the potential downside risk while retaining upside potential.

Which of the following options would be the most effective strategy for managing currency risk in this scenario?