To setup JVM options inside elastic beanstalk, your bundle file must be like this:
-bundle.zip
|--.ebextensions //do not forget the dot at the beginning of the name
|--jvm.config
|--java_app.jar
And, the jvm.config file must be set like this:
option_settings:
aws:elasticbeanstalk:application:environment:
XX:MaxPermSize: 256m
Xmx: 1024m
Xms: 512m
When you upload your bundle, first those settings will be read and applied to the server's (Ec2 instance's) JVM and you must see the health as "OK".