Transform "I am studying now," he said into indirect speech.

Transforming direct speech into indirect speech requires adjusting the tense and sometimes the pronouns based on the context of the statement. In this case, the original statement is in the present continuous tense, "I am studying now," which indicates an ongoing action happening at the moment of speaking.

The most fitting transformation into indirect speech involves shifting the present continuous tense to the past continuous tense. Thus, "am studying" changes to "was studying." Furthermore, the word "now" needs to be modified to reflect the change in time reference when speaking of the past, becoming "at that time."

This reasoning aligns perfectly with the provided choice. It captures the necessary tense change and the contextual shift regarding the timing of the action, making it an accurate transformation of the original speech. Other options do not maintain these aspects effectively.