Alternative 2 is correct. Some references:
http://www.ancientgroove.co.uk/essays/engraving.html:
Word extensions should run from the final syllable of a word and stop
at a point aligning with the right hand edge of the last note to which
that syllable is sung.
https://archive.org/details/preparingmusicma00dona Page 86:
The extension of words through the duration of several tied notes or
notes of varying pitch is shown by a solid line extending along the
type line...
http://lilypond.org/doc/v2.19/Documentation/learning/aligning-lyrics-to-a-melody:
If a syllable extends over several notes or a single very long note an
extender line is usually drawn from the syllable extending under all
the notes for that syllable.
https://musescore.org/en/handbook/lyrics
A melisma is a syllable or word that extends over two or more notes.
It is indicated by an underline extending from the base of a syllable
to the last note of the melisma.