O'Leary said on Monday he would stay for another five years at Europe's largest low-cost airline, which announced a 20 million euro loss for the third quarter due to weaker fares.
Under the new options scheme he will be granted the option of buying 10 million shares at the current share price of 11.12 euros if he either increases annual profit to 2 billion euros from a forecast of 1-1.1 billion in the current financial year, or if the share price rises to 21 euros, the airline said.
"The terms of the options will require him to double Ryanair's profitability to 2 billion euros per annum and/or increase the share price to 21 euros per share over the next five years to qualify for all of these options," Ryanair said in a statement.
If the share price hits 21 euros, O'Leary would earn a profit of 9.88 euros on each of the 10 million share options.
The airline said it has also offered each of its 11 non-executive directors options on over 50,000 shares each on the same terms.
Ryanair's shares have fallen from a record high of 19.39 euros in August 2017 due to a combination of staffing issues, strikes, higher fuel costs and increased competition on European short-haul routes. While it was in the red for the third quarter it is still expected to make a profit for the full financial year.
O'Leary, the airline's second-biggest shareholder with 46 million shares, or a 4 percent stake, will move to become CEO of a new group structure, the airline said on Monday.
Under his current contract he earns "approximately 1 million euros" per year and is eligible for annual bonuses of up to 100 percent of his salary depending on performance, according to the company's annual report.
(Reporting by Conor Humphries; Editing by Susan Fenton)