A lease option is a compound transaction that consists of 3 separate transactions (and contracts): 1) the lease (ie your rental agreement), 2) an option to purchase the property at a certain price with the agreed upon terms, and 3) a purchase and sale agreement (provided your tenant/buyer exercises the option). Typically, the option fee is non-refundable, but it usually gets applied towards the purchase price if the option gets exercised. You'll collect your normal security deposit, first and last months rent, and monthly rent along with another fee (basically a portion of the down-payment--which you should escrow because this usually is refundable [by law in certain jurisdictions]). Make sure you document all of this, and it would probably be a good idea for you to hire an attorney to help you set all of this up.
So, let's use some numbers to help bring this home. Let's say you want to sell your house to your tenant buyer for 150K, and your tenant currently pays 1K/month rent. Let's also say you're willing to take a 5% down-payment (7.5K), and an option (to purchase the property at 150K using an all-inclusive trust deed [aka wrap or subject-to mortgage]) for 1K that has to be exercised within the next 12 months. Basically, that means your tenant/buyer will pay you 1K for the option, 1K/month for rent, and 625/month for the down-payment.
Make sure to redo your lease. You can keep most of your current terms the same, but you should have your lawyer to specify a clause to ensure that the tenant has to be in good standing with his/her rent in order to exercise the option.