Types of Options and Non-Guaranteed Contracts
Posted: Thu Jun 11, 2015 8:35 pm
This is a major pet peeve of mine. I know we should all be so lucky to be bothered by such trivial things, but indulge my rant. 
It drives me crazy when the media reports different Options as the same or Team Options and Non-Guaranteed Contracts as the same. They aren't and the differences do matter.
There are differences between Team Options and Non-Guaranteed Contracts.
1. Team Options must be exercised by 6/30. If a Team Option is not exercised by 6/30, the player becomes a Free Agent. Non-Guaranteed contracts can have specific dates on when they guarantee (or when a portion guarantees). Or they can have no date at all. On 1/10, all contracts become fully guaranteed for the remainder of the season.
2. In a contract with Options, the salary of an Option year can not be less than the year proceeding it. Meaning you can't have a year one be $4 million and then have a Team Option for year two of $3.7 million. In a Non-Guaranteed contract this is allowable.
3. A player with a Non-Guaranteed contract could be traded to another team and subsequently released by the new team at no cost to them (or the cost of the guaranteed portion of the contract if applicable). This is what the Bucks can do with Caron Butler after their trade today.
A player with a Team Option has to have his Option exercised by his first them before he can be traded to the new team. Immediately upon exercising that Team Option it triggers his deal. In most cases, this makes the contract Fully Guaranteed (Timofey Mozgov is an example of this if Cleveland exercises their TO on him). In a few cases (Kostas Papanikolaou for example) there is a Team Option that upon being picked up triggers the deal to become a Non-Guaranteed contract.
4. There can only be one Option year (Player or Team) in any type of contract. The only exception is for Rookie Scale contracts which include two Team Option years. A contract can have, and often does, include multiple Non-Guaranteed years.
5. If a Team Option is declined, the team still retains a Cap Hold and subsequent Free Agents rights to the player until such time as the player signs elsewhere or is renounced. A Non-Guaranteed contract can not be declined. The player must be placed on waivers. He, and the remainder of his contract, are eligible to be claimed by any team with the means to do so. The original team has no rights to the player once he is waived.
As for types of Options...
1. Team Option - covered pretty extensively above.
2. Player Option - Must be exercised by the player to opt in to his contract by 6/30. If the player does not opt in by 6/30 he is a Free Agent.
3. Early Termination Option - Must be exercised by the player to opt out of his contract by 6/30. If the player does not opt out by 6/30 he is still under contract to his team.
All contracts can, but generally don't, stipulate early dates for decisions to be made. If there is no date stipulated, players or teams can exercise any type of option whenever they wish. They must simply do so by 6/30.
I'm sure not many people care nearly as much as I do, but I wanted to put that out there for all. I know I've been asked a few times what the differences are. I've been meaning to type this up for a while and just now got around to it.
It drives me crazy when the media reports different Options as the same or Team Options and Non-Guaranteed Contracts as the same. They aren't and the differences do matter.There are differences between Team Options and Non-Guaranteed Contracts.
1. Team Options must be exercised by 6/30. If a Team Option is not exercised by 6/30, the player becomes a Free Agent. Non-Guaranteed contracts can have specific dates on when they guarantee (or when a portion guarantees). Or they can have no date at all. On 1/10, all contracts become fully guaranteed for the remainder of the season.
2. In a contract with Options, the salary of an Option year can not be less than the year proceeding it. Meaning you can't have a year one be $4 million and then have a Team Option for year two of $3.7 million. In a Non-Guaranteed contract this is allowable.
3. A player with a Non-Guaranteed contract could be traded to another team and subsequently released by the new team at no cost to them (or the cost of the guaranteed portion of the contract if applicable). This is what the Bucks can do with Caron Butler after their trade today.
A player with a Team Option has to have his Option exercised by his first them before he can be traded to the new team. Immediately upon exercising that Team Option it triggers his deal. In most cases, this makes the contract Fully Guaranteed (Timofey Mozgov is an example of this if Cleveland exercises their TO on him). In a few cases (Kostas Papanikolaou for example) there is a Team Option that upon being picked up triggers the deal to become a Non-Guaranteed contract.
4. There can only be one Option year (Player or Team) in any type of contract. The only exception is for Rookie Scale contracts which include two Team Option years. A contract can have, and often does, include multiple Non-Guaranteed years.
5. If a Team Option is declined, the team still retains a Cap Hold and subsequent Free Agents rights to the player until such time as the player signs elsewhere or is renounced. A Non-Guaranteed contract can not be declined. The player must be placed on waivers. He, and the remainder of his contract, are eligible to be claimed by any team with the means to do so. The original team has no rights to the player once he is waived.
As for types of Options...
1. Team Option - covered pretty extensively above.
2. Player Option - Must be exercised by the player to opt in to his contract by 6/30. If the player does not opt in by 6/30 he is a Free Agent.
3. Early Termination Option - Must be exercised by the player to opt out of his contract by 6/30. If the player does not opt out by 6/30 he is still under contract to his team.
All contracts can, but generally don't, stipulate early dates for decisions to be made. If there is no date stipulated, players or teams can exercise any type of option whenever they wish. They must simply do so by 6/30.
I'm sure not many people care nearly as much as I do, but I wanted to put that out there for all. I know I've been asked a few times what the differences are. I've been meaning to type this up for a while and just now got around to it.
