The correct answer is “are watching.”
The verb “to watch” is conjugated in the present continuous tense when the action is happening now. In this case, the sentence is “He and she are watching a movie now.” This means that the two people are currently watching a movie.
The other options are incorrect because they do not agree with the tense of the sentence. The verb “to do” is conjugated in the present tense, but the sentence is about an action that is happening now. The verb “is” is conjugated in the present tense, but the sentence is about two people. The verb “were” is conjugated in the past tense, but the sentence is about an action that is happening now.
In conclusion, the correct answer is “are watching.”