The correct answer is: When the stone is at the lowest position.
When the stone is at the lowest position, it has the greatest speed and therefore the greatest centripetal force. The tension in the string is equal to the centripetal force, so it is also greatest at this point.
When the stone is at the highest position, it has the least speed and therefore the least centripetal force. The tension in the string is also least at this point.
When the string is horizontal, the stone is neither at the highest nor the lowest position, so the tension in the string is somewhere in between.
In conclusion, the tension in the string is maximum when the stone is at the lowest position.