getting compile error for diamond operator in idea ide

Question

I am getting this error while trying to compile some simple source code in idea ide.

java: diamond operator is not supported in -source 1.6 (use -source 7 or higher to enable diamond operator)

jdk is 1.7.40 from oracle

but where is this place to add this "-source 7" option?

i tried adding in ide settings but that had no effect.