I suggest you to create configurable product rather than custom option because with configurable product you will be able to keep track of each product varieties.
Suppose with custom option you don't have stock of product then this will create problem whenever anyone ordered same product while with configurable product inventory will manage automatically and if product is out of stock then it will be not available on front-end.
Let us assume that you offer shirts in several colors and sizes. You have two options- either you apply simple products with Magento custom options of the sizes or colors or the configurable product with associated products that are produced as unique combination of colors and sizes.
The main focus of the merchants are the configurable products which is very complex. The procedure of creating one shirt with 5 sizes and 3 colors is basically creating one configured product along with 15 simple associated products. Well it seems like simple products have an easy way out but wait before you judge.
You will not be able to keep track of the product varieties in case you choose simple products with custom options. In this process, if you do not have the definite size or color in your warehouse, your consumers will be able to buy the products.
Via configurable product, you are now enabled to create different product varieties and also sell them as a part of the configurable products. Using the SKU, variation acts as the separate product. The Magento configurable product enables you to set the super attributes which will allow you to set few specific setting for each of the combination.
You can even create stock of your product combination, when are you running out of color or size, the variants will not be available for purchase. In a way you are not disappointing your consumer.
Well deciding on custom option or configurable option is your decision. I have stated the pros and cons of these two options. Hope you can now make the right choice which will help your business.