Well this is where things get interesting. As far as source settings I would leave it as “do nothing”. What you see is what you get and deal with it in color correction. Setting it to “graphic levels” will expand the levels most likely clipping blacks and whites that were between 0-15 and 236-255. If you knew you were going to prepare for broadcast, and you had full range levels, then you would select “video levels” ensuring that whatever black levels between 0-15 become 16+ and same for 236-255 become 235-.
There is a school of thought that since everything inside Media Composer is assumed to be video levels, and that is stuff like Avid black in timeline, title tool, paint, etc. will all be 16-235 range. So many people will work as though it were for broadcast, then when delivering to the web, will export out as RGB levels expanding 16-235 to 0-255.
Michael