OSX 12.4 started ignoring Option key

First, take a look at System Preferences->Keyboard, and look for Modifiers (or search for Modifiers directly from the System Preferences window; I am on Ventura, and things have been reorganized, so I don't remember the exact location).

See if the "Option key" is matched to itself or if accidentally it was set to "No action".

I post a screenshot from Ventura - it will be similar in Monterey, just with a slightly different presentation:

Try restarting in Safe Mode - still no Option key?

Restart normally. Is it working?

Firstly follow the previous Contributor suggestions.

Once that has been hopefully resolved.

Q - " OSX 12.4  " Monterey is somewhat outdated and really should be updated to current version 12.6.2 released Dec 13, 2022

The updates has bugs fixes and security issues fixes

Links below on this specific issue

Keep your Mac up to date - Apple Support (CA)

About the security content of macOS Monterey 12.6.2 - Apple Support (CA)

After re-reading this question and dependent on the User using the Builtin Keyboard, follow the advice from above posting regarding using an External Keyboard and Testing and the issue

If the External Keyboard functions as expected this make one think the Internal Keyboard has hardware issue.

Should that be the situation >>

Have the computer evaluated by the Professionals who have the Special Hardware Software and Expertise to diagnose the issue and offer possible solutions

Try an external keyboard (doesn't have to be from Apple) and see if its option key works.