I too encountered this problem and tried resolving it through the command line. But it seems like it doesn’t understand the cmd line options:
-bash-3.2$ javac -Xmx256M HelloWorldApp.java
Error occurred during initialization of VM
Could not reserve enough space for object heap
Error: Could not create the Java Virtual Machine.
Error: A fatal exception has occurred. Program will exit.
I think here you will have to set the _JAVA_OPTIONS. You can do this by following the below code:
-bash-3.2$ export _JAVA_OPTIONS="-Xmx256M"
-bash-3.2$ javac HelloWorldApp.java
Picked up _JAVA_OPTIONS: -Xmx256M