How do air traffic controllers manage vertical separation and sequencing of multiple aircraft holding in a vertical 'stack' over an approach fix?

1. Aircraft are assigned flight levels separated by 1,000 feet; as the lowest aircraft at the bottom of the stack is cleared for approach, each aircraft above is stepped down one level in sequence.
2. All aircraft in the stack hold at the exact same altitude.
3. Aircraft at the top of the stack are cleared for landing first by diving through the lower aircraft.
4. Aircraft are stacked horizontally side by side at the same altitude.