Hi Suganthi,
The best way to go about in my view would be to first patch EHP5 SP9 to EHP5 SP11 and then upgrade SQL, this will not take long and can be done on a weekend.
Then you have a week for users to test and then you can upgrade it to EHP7 latest.
Going from EHP5 to EHP7 will take time whereas SP9 to SP11 will finish quite early. your option 1 will however take a lot of downtime initially.
You can also save a lot of time by doing the initial preparations before the upgrade. Refer the SUM guide for this.
You can start SUM and run the pre processes until Execution one week before your planned downtime.
Hope this helps
AC