All three sentences are passable, however, I believe that sentence #2 is the most correct. Phil is also correct that you need the article before UFO.
"In" would mean that you or an object is inside that something - e.g. the UFO is in the sky
"At" would mean that you or an object is located somewhere - e.g. fire a missile at the UFO
"Into" would mean movement from something to something - e.g. the UFO arose and went into the sky