A sword of Damocles means a constant threat or danger hanging over someone. The correct answer is this meaning because the expression is used figuratively, not only by its literal words.

Examples:

• The threat of dismissal hung over him like a sword of Damocles.
• In an HSC essay, A sword of Damocles can express this meaning: a constant threat or danger hanging over someone.
• When this expression appears in a passage, connect A sword of Damocles with the idea of a constant threat or danger hanging over someone.