I don’t see a good reason for Apple to offer a third size of the Watch. At this point, the two sizes are mirroring what typical analogue watches are sized at in the standard and oversized categories. Going bigger would put it into a category that would likely appeal to so few people, given it would look out of proportion. With analogue watches, the overall size generally includes multiple steps of the case, which the Apple Watch does not have with its simple rounded (or possibly square edged) design, so going bigger beyond say 47mm would be a huge amount of screen on your wrist.
Maybe if they made a more ruggedized version with extra bumper guards AND shifted to a round form factor, that would drive the size up without looking too out of proportion.
Going smaller also doesn’t make as much sense. I‘ve already seen first hand how my mother-in-law has a hard time reading and interacting with what the 40mm Watch shows on screen, when she’s tried on my wife’s Watch. And with my 44mm Watch, it looks like a mini iPhone on her small wrist.