Option 2 is the right answer. Let us look into the meanings of the given words:
reserves: Liquid assets held by a bank.
reserve: retain for future use.
reserved: kept specially for a particular person / a person who doesn't share his feelings, thoughts or emotions.
reservation: an arrangement to have a room, table held for your use at a later time / a feeling of doubt about something.
The given sentence is about a buffer stock that is kept aside for future use. So, the right word is --'reserve'. Complete sentence: Buffer stock refers to a reserve of a commodity that is used to offset price fluctuations.