I can "group into conversations" or "show each message separately". That's it. No sub-options in either my online Outlook 365 nor my desktop version. I've always grouped by conversation and used to be able to see my replies in the thread in the reading pane, but now I can only view my recent replies by manually expanding the thread or getting into my Sent Items box. This was fine until very recently. Even manually expanding the thread can be sketchy - I've found other people's replies to the thread that didn't even show up in the pane to begin with! I don't know what changed, but none of the replies on this troubleshooting thread so far have been helpful since they reference options that don't exist for me.
Of note, my mobile version doesn't have this problem. My recent replies show in the thread, as usual.