Oil change - O ring replacement

[Frodo]

Had an oil change question. I've got the filter off and am replacing the O-ring on the housing. My question is where exactly it goes.

Does it go into the channel right next to the threads, like this:



Or, does it go right up against the flange, ie a little further from the threads (though in this pic part of it is not quite totally up against the flange), like this:



I'm thinking the first choice is right, but I wanted a second opinion.

Thanks in advance.