disk utility not showing erase option

Here is an Apple article for things you should do to a Mac that is being sold (or gifted)...many of the steps should be done before erasing the Mac:

What to do before you sell, give away, or trade in your Mac - Apple Support

To erase the startup drive, you have to be booted into Recovery Mode and use Disk Utility there.

Also, in Disk Utility you have to do View > Show all Devices. Then erase the top level drive you want to erase. Reformat it as APFS. If you are gifting the Mac it would be a kind gesture to go ahead and reinstall macOS while you are at it.