Option 1 is "better" until there are a lot of settings (ie: dozens, hundreds). If there are "a lot of settings" there may be better ways to model them.
As one example, maybe that information doesn't even belong in this system and could be pushed to its own independent system that manages that kind of data for all applications.
As another example, maybe some of those settings actually could relate to something else in your system, maybe even a concept that you haven't yet introduced; IE: maybe that data varies by Season, or by Company, and you haven't thought to model those types yet.
I would save Option 2 for cases where it's truly necessary (ie: you have thousands of values to write). Yes, it's very flexible, but it also loses a lot of semantic meaning, and is overall a failure of your data model. (It's actually a degeneracy of the use of the database and/or ORM and should only be chosen very carefully.)