Confused about paypal express checkout integration

Under “Payment Gateway & SSL” With paypal express checkout selected there is a snippet under IPN HANDLER URL that states

This URL is passed to PayPal for all new charges and subscriptions. You SHOULD NOT set this in your PayPal account settings.

Why would you give us the ipn handle url if we are not supposed to set in our paypal account settings?

Also in the “How to Enable Express Checkout” Guide it states

Log in to your PayPal Business account.
Click the My Account tab.
Click the Profile tab. If you haven’t already done so, you need to verify your account before requesting API credentials.
Click Request API credentials under Account information.
Click Set up PayPal API credentials and permissions under Option 1.
Click Request API Credentials.
Click Request API signature.
Click Agree and Submit.

Option 1 is

Option 1 – Grant API permissions to a third party to use certain PayPal APIs on your behalf.

Choose this option if:

You are using a pre-integrated shopping cart, hosted by a third party
Your website is hosted and managed by a third-party service provider

while option 2 is

Option 2 – Request API credentials to create your own API username and password.

This option applies to:

Custom websites and online stores
Pre-integrated shopping carts running on your own server

It doesn’t make sense to pick option 1 since I am not using a thirdparty (other than paypal) to process my API credentials since the code is hosted on my server.

I would sincerely appreciate any guidance in this particular issues.

Thank you for your time,

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