I use the "roll for initiative" method unless I have a good reason not to. I think almost everybody here does the same, but we disagree on what is a good enough reason.
Situation: There is a tense stand off. Player 1 is facing down Players 2 and 3. Player 1 has a dagger in his hand, but is holding it in a casual manner. Sensing the negotiations are going badly for him, Player 1 decides to throw the dagger at Player 2. (Everybody agrees there shouldn't be a surprise round.)
Option 1
DM: Roll for initiative
Option2
DM: Player 1 goes first, as he has a dagger in his hand, which he throws before anyone can react
Player 2: You never mentioned he had a dagger out
DM: You didn't see it, his Sleight of Hand is higher than your passive Perception
Player 2: It's a tense stand off. Why are you using passive Perception? We should get to roll our Perception checks
Player 1: Fair enough, but my Sleight of Hand is really good
Player 3: If it's already in his hand, surely it should be a Deception check?
DM: You're probably right. Okay, Perception vs Deception, only Player 3 spots the dagger
Player 3: I tell everybody else
Player 1: I throw it first
Player 3: It's quicker to say the word "dagger" than it is to throw a dagger
DM: OK, Player 3 yells "Dagger"
Player 1: OK, then I throw it at Player 2.
Player 3: Is that all I got to do on my turn? That's not fair
DM: No, that wasn't your turn, you can have a turn later once he has thrown the dagger
Player 3: But you don't know what I was going to do yet, it might be quicker than throwing a dagger
DM: So what were you going to do?
Player 3: I'm going to drink a potion
DM: You don't have a potion in your hand, so you can't do it in time
Player 3: You didn't ask us what we had in our hands. You only asked Player 1.
DM: So did you have a potion in your hand?
Player 3: Yes, I don't trust Player 1 so I had a potion ready in case he tried anything
Player 1: In that case, I throw my dagger at Player 3, not Player 2
Player 3: You can't change your action now that you know what mine is going to be
Player 1: I would have seen the potion you conveniently forgot to mention. Anyway, throwing a dagger is faster than drinking a potion
Player 3: I came prepared. The potion has been decanted into a beer mug. I can take a few swallows of beer, errr I mean potion, before a dagger can travel 30 feet. Actually, you don't even know it is a potion because its in the mug; you probably think it's beer
Player 1: I don't trust you either, so I'll know you were up to something
DM: Um, Insight vs Deception; no you don't know there's a potion in the mug
Player 1: I still don't trust him; I'm throwing the dagger at Player 3 anyway
DM: No, you failed the roll, you throw at Player 2.
Player 2: I dive behind the wall, out of the way, so he misses
Player 1: Does he get behind the wall before I can throw?
DM: It's a low wall, and he's right next to it, I guess it's an opposed Initiative check.
Player 1: If I lose the check, I'll throw at Player 3 instead
Player 3: Not if I drink my potion first! It's a potion of invisibility
DM: Okay, we'll have a 3 way Initiative check (dice are rolled) order is Player 1, then Player 2 then Player 3
(Player 1 throws dagger at Player 2, Player 2 drinks potion, Player 3 dives behind the wall)
DM: Okay, round 2, at last. Player 1, you're up first
Player 3: Hang on a minute, I had a loaded crossbow hidden behind the wall, in case things got rough. Surely I can fire it before Player 1 can do anything?
Player 1: You don't know what I was going to do yet ...