Hi everyone, Is there any settings to have the item options as a dropdown instead of individually options? Or this needs to be addressed via customization?

You can go to Commerce -> Websites -> Configuration, then select the website and domain, now go to Advanced tab, Item Options subtab, there you have the item options configuration and can select a selector template.

And there are templates already out of the box to be use? Or I should create them?

There are OOB templates to use