What is the right course of action here?

Your answer is correct because the green car has priority to proceed first in this situation.

The reason is the traffic sign you see on the right—a "Yield" sign with an additional plate indicating the priority road layout. This sign tells you that you must yield to traffic on the main road, which includes the green car coming from the left side, because it is traveling on the priority road.

The red car coming from the opposite direction is turning left, so it must also give way to the green car going straight on the priority road. Since you are facing the yield sign and are turning right, you must wait for the green car to pass before you proceed.

In summary, the green car proceeds first because it is on the priority road and has the right of way. You must wait for it before driving ahead. This is why option 1 is the correct answer.