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e.g.

Bold:

Click "Setting" then click "Options".

Italic:

Click "Setting" then click "Options".

Or even underline?

Or none quotation marks?

Click Setting then click Options.


Which is better/correct/preferred?

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According to the Microsoft Manual of Style for Technical Publications, for commands on menus and buttons:

Bold in procedures; capitalization follows that of user interface.

This is the convention we use for technical documentation in my company, as well, and correlates to your last example:

Click Setting then click Options.

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Underlines are only for links; don't use them in copy for anything else (outside certain legal contexts).

Either use bold/italic or quotes, but not both. It's redundant. Which one you choose will depend on what's easiest to read. If you have many of these steps and commands, I would go with a bold or italic, as too many quotes gets visually exhausting.

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I have seen bold and I have seen inverted commas. I haven't seen combinations.

Simply say which you are going to use at the beginning. For example, I just found this in 'Beginning Android Application Development': "Code is presented in two different ways: We use a monofont type with no highlighting for most code examples. We use bolding to emphasize code that is of particular importance in the present context." (I haven't included their formatting.)

I realise that this code rather than which menu item to choose, but I think there are a lot of similarities.

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