Troy believes the lottery to be foolish because there is such a slim chance of winning that there is no point in it. This shows he is a cautious person and isn't gullible.
I believe that your answer is the first option due to how late the crying is, and unlike in "The Tell-Tale Heart" where the heart is constant and represents the slow descent of madness, the cry of the cat only appears at the end.
The portion of the story where it shows the speaker's madness is actually his looking for and finding similarities in the second cat and wishing to kill it.
Hope this was helpful.
It describes how, during a ceremony at the round house, Vince Madwesin, the tribal policeman, was serving off-duty as a security guard. When Vince found some attendees drinking, he asked them to leave out of respect for the ceremony. One of the drinkers stumbled away and was later found dead from choking on his vomit.
