What is the correct way of using pwelch ?

I have array 'x' of 5000 real valued data over which i have to use 'pwelch'. I am doing it in the following two ways.

First way is:

Fs = 8000;
noverlap = 125;
window = 250;
nfft1 = 250;

[psL fpwelch] = pwelch(x,hamming(window),noverlap,nfft1,Fs);

second way is:

Fs = 8000;
noverlap = 125;
window = 250;
nfft2 = 500;

[psL fpwelch] = pwelch(x,hamming(window),noverlap,nfft2,Fs);

The only differnce is that nfft2 > nfft1. The graph is smooth enough without any noise when i use second way which is my requirement as well. First way is correct, i have no doubt in that.

Is second way is also correct ?