For me it took un-pairing and re-pairing the phone to Xcode, which then decided it didn't know my watch's metadata anymore for a bit... (Device was called for a while) But once Xcode re-fetched the device metadata, and got into a state where it said developer mode was disabled, only at THAT point did the option of enabling Developer mode appear in Settings > Privacy & Security for me. (Way at the bottom, so you know where it ISN'T, and know where to look once it DOES show up.) No Apple documentation on this anywhere that I could find.

Hey, Apple Team... Are you EVER going to make this work reliably? Clearly this has been an ongoing issue for lots of developers. It's certainly been an ongoing issue for me. It feels like your dev team is happy with the "Have you tried turning the computer off and on" answer for this... Which... would be embarrassing, even if it worked reliably. It does not. You own all the hardware and software. Please fix this so it works AT ALL RELIABLY.