Setting a pass code on Apple Watch SE 2nd Gen

I have an iPhone X; just got an apple watch SE 2nd Gen. When setting a pass code on the SE, in Passcode section of Settings, the options are not getting highlighted (both on the Phone and the Watch); ie I can see the options but they are dim as if in background. Hence, I cannot set Passcode on the watch. I have tried everything, including completely erasing and re-setting the watch.

Will be grateful if someone can help with me this.