Options 1 and 2 are reasonable alternatives, with Option 1 being the simplest. Option 3 requires paying the same penalty every year until the excess is resolved, so usually does not make sense.
The financial institution might allow a recharacterization or a return of contribution before the due date of your tax return to be done in-kind, but it's usually done with cash, which would mean selling an investment if the amount of cash in the sweep account is insufficient to be able to do this.
