You may not install to this volume because the computer is missing a firmware partition
After installing El Capitan on your external SSD, you have to restart and run macOS Recovery over the internet AGAIN.
This time it will show you an option to re-install Big Sur. But before that, make sure you reformat your external SSD as APFS in disk utility first!
APFS option is available now since it was missing the first time you formatted your hard drive to install El Capitan.
You can now install Big Sur on your external SSD!