Option #2 is how I would do it.
I prefer to draw a "virtual" cutting line on the quilt, apply binding as if the marked line were the cutting line, then trim to the line. If I am finishing the binding by machine, I need the line to be on the back of the quilt, so I sew over the marked line with a long basting stitch and contrasting bobbin thread. The bobbin thread becomes my "virtual" cutting line on the back of the quilt.
Doing it this way ensures that I will not have to deal with puckers or tucks while I sew on the binding. Since the quilting ends so far from the edge on your quilt, seems to me this could be a problem if you cut before sewing. Also, marking and sewing first helps prevent the edges of the quilt stretching out of shape as the binding is sewn on.
Just be careful when you do the actual trimming to *not* trim any of the binding off, especially at the corners. At the corners it can create a hole in the miter. (Do not ask me how I know this.)
This is not how most quilters do it, but I got so frustrated with cutting first that I developed this method that works much better for me.