Light watch transverse to direction of motion. This case is interesting because it separates length contraction from time dilation completely.

Of course, as usual in special relativity, calling something "time dilation" leads us to mind boggling ideas of "symmetry breaking": if both frames have a light watch, how can both possibly observe the other to be time dilated?

And the answer to this, is the usual: in special relativity time and space are interwoven in a fucked up way, everything is just a spacetime event.

In this case, there are three spacetime events of interest: both clocks start at same position, your beam hits up at x=0, moving frame hits up at x>0.

Those two mentioned events are spacelike-separated events, and therefore even though they seem simultaneous to you, they are not going to be simultaneous to the moving observer!

If little clock one meter away from you tells you that at the time of some event (your light beam hit up) the moving light watch was only 50% up, this is just a number given by your one meter away watch!