Option 1 is the most important option, as it is here that we have the opportunity to create partitions!
I chose to make an Extended partition on the drive that I had wiped clean:
As you can see, you have the choice of entering how much space you want to use in Megabytes or in % of the total drive. For an extended partition, I recommend you use 100% unless you are keeping some free space open for an installation of Linux or something similar. If you need to create a primary DOS partition, you must do that BEFORE creating the extended partition.
OK, my extended partition is complete: