Reading file contents into a string
Is the goal to get a string containing the content of the file? or to add the content of a file to an existing StringBuilder?

if it's the former then Option 1 can drop the string builder altogether ... or better yet.

string value = File.ReadAllText("C:\A big file.txt");


if it's the latter then you might want to think about using StringBuilder.EnsureCapacity() to avoid the overhead of resizing the buffer more then it needs to.