What is the right course of action?

Your answer is correct because according to German traffic rules at a stop sign, you must come to a complete stop at the stop line (option 3). After stopping, you must give right of way to all other road users approaching the intersection, including cyclists (option 1) and buses (option 2).

The proper procedure is to stop fully to observe which vehicles have the priority. In this case, the cyclist on your left and the bus ahead have priority. Giving way ensures safety and avoids collisions at the intersection.

Remember, the stop line marks where you must stop your vehicle, and priority rules require yielding to cyclists and public transport vehicles when they are already at or approaching the junction. This combination of stopping and giving way is essential at stop signs in Germany.