Option (1) should be fine as long as the trigger is efficiently written and there is an index to support the trigger's query. For example, if the table is clustered on ( alarmNumber, ID ) rather than on just ID.

CREATE TRIGGER table_name__trg_insert

ON table_name

INSTEAD OF INSERT

AS

INSERT INTO table_name

SELECT i.eventTime, i.alarmNumber, i.alarmState

FROM inserted i

OUTER APPLY (

SELECT TOP (1) *

FROM table_name tn

WHERE tn.alarmNumber = i.alarmNumber

ORDER BY ID DESC

) AS prev_alarm

WHERE prev_alarm.alarmState <> i.alarmState OR prev_alarm.alarmState IS NULL

GO