A new window will open giving you the option to Enable Option Stock. Make sure to check this box.
Once checked, you will see the variations of your options appear underneath. Here, you can set your current stock level of each variant and set up an alert that notifies you when the stock for each variant falls below a certain level in the Alert Level field.
When you are happy with the values you have entered, click Confirm.
When your stock for a variant reaches 0, a sold-out message will appear next to the variant on your store, notifying your customer that they will not be able to select that variant.