Before you soak the lavender in olive oil, you first must dry it. If there is any moisture in the lavender flowers, it will spoil your oil and make it rancid.
Cut the stems off the lavender with garden shears and tie them in a bunch with the rubber band. Hang the bunch upside down and let it sit for 10 to 14 days, until it is completely dried. Make sure the lavender is hanging in a warm area that does not get direct sunlight.
After the lavender is dry, place it in the jar. Fill with enough olive oil to completely immerse the lavender, and screw the jar lid closed. Place in a sunny area for 2 to 6 weeks. During this time, the sun's heat will release the lavender's fragrance and properties into the oil.
After the olive oil has been infused, strain the lavender by pouring the mixture through the cheesecloth or muslin and into your bottle. If after this, you want your oil to be more fragrant, simply strain the old lavender from the oil, add new flowers and soak again.