In previous eras, option clauses and option bonuses in contracts were a big deal. It was a helpful way for NFL teams to retain talent. But such option structures and option bonuses have mostly gone extinct in the NFL.

What is an option? An option is a clause in a player’s contract that allows the team to extend the player’s contract for an additional year for a predetermined salary. If the team exercises the option, the player’s rights are retained by the team. If the team does not exercise the option, in most cases the player becomes a free agent.

Traditionally, if an NFL player had an option in his contract, his NFL team could unilaterally opt to keep the player on their roster, under the terms set forth in the contract. In many cases, when the team exercised the option, a predetermined option bonus would be triggered.

The traditional option clause is distinct from the modern use of option bonuses. Sometimes when people hear the term “option bonus” in the modern NFL, they unintentionally conflate that with the traditional use of option clauses in contracts, but traditional option clauses and modern option bonuses are not the same thing.

Option clauses in contracts are nearly extinct in the NFL today, but they are still very popular in the NBA and MLB.

 

Good Examples From NBA and MLB

One good recent example is NBA star Fred VanVleet. In 2023, he signed a deal with the Houston Rockets. This was a two-year deal with a third-year club option.

VanVleet was slated to be paid $82 million over the first two seasons of the deal. Then, the team has the option to extend the contract for a third year, in its sole discretion. If they exercised the option, they’d be obligated to pay VanVleet $44.8 million in that third season. If Houston does not exercise the option, then VanVleet becomes a free agent after the second year of the deal.

On the flipside, NBA and MLB also often see player-options. These function just like the team-options, except the player gets to make the call as to whether he wants to stick with the team or if he wants to void the contract and become a free agent.

For example, MLB relief pitcher Wandy Peralta signed a one-year deal with the Padres before the 2024 season. He was paid $3.35 million for 2024. Peralta then had a player-option for 2025 at $4.25 million. It was his call to make, and he exercised the option, so he’s on the team in 2025. He also has player-options for 2026 and 2027.

 

The Ruthless Rozelle Rules

Pete Rozelle was commissioner of the NFL for thirty seasons (1960-1989). He was a savvy public relations artist and ruthless negotiator. He was able to garner the public’s overwhelming support and favor, which made it very hard for the players to gain an advantage in CBA negotiations.

NFL players demanded free agency. Rozelle negotiated with the NFLPA, allowing for free agency starting in 1963, but he implemented a set of option-year protocols which helped to significantly depress free agency.

The standard NFL player contract would include an option-year clause, in which the player could play an additional year with his team—after his initial contract expired, at the team’s discretion—but the player would be paid 10% less than his pay in the previous year. After the player had played out the option year, he could then become a free agent.

This structure incentivized players to sign extensions with their current NFL teams, before the option-year kicked in, to avoid the pay cut. This ensured that very few players would ever make it to free agency.

In the 1960s, the AFL standard player contracts also contained option clauses, in which the AFL teams could retain their players for an additional year, but rather than being set at the 10% decrease like the NFL, the individual AFL players could actually negotiate the amount of their salary during their option year.

 

Broadway Joe Makes Waves

In 1965, the charismatic star QB from University of Alabama Joe Namath spurned the NFL to join the AFL’s New York Jets. His first deal with the Jets was a ground-breaking deal, $427,000 over three years.

He later signed a multi-year contract extension that included an option clause. The Jets could secure Namath’s rights for one more season after the contract expired, but they’d need to pay him 110% of his salary of the previous season. This was the biggest and best terms ever negotiated by any player in either league.

When the NFL and AFL merged in 1970, the Rozelle Rules remained in tact, but Namath and some of the AFL players were grandfathered in. This 110% clause was in all of Namath’s subsequent contract extensions until he was waived by the Jets in 1977.

 

The Legal Fight that Changed It

The NFLPA filed lawsuit against the NFL (Mackey v. NFL) citing multiple grievances, including the Rozelle option bonus protocol. In 1976, the NFLPA prevailed and the Rozelle Rules were ended.

But then Rozelle and the NFL owners were able to negotiate with the NFLPA to bring back a variation of the Roselle Rules. As part of the 1977 CBA, option clauses in contracts would now be freely negotiated between teams and players.

If a player signed with an NFL team as a free agent, the player’s new team was still responsible to give compensation to the team that lost the free agent, but the compensation awarded would be on the basis of the amount of the salary received by departing free agent, rather than the commissioner’s subjective edict. The formula they crafted was the forerunner to the formula the NFL currently uses to determine compensatory picks.

Option clauses became a staple part of contract negotiations. Many of the elite NFL players were able negotiate deals that ensured their salaries in those option years would be (at least) partially guaranteed.

Option clauses in contracts were very popular in the NFL from the late 1970s into the 1990s, but they eventually faded significantly by the late 1990s.

 

Why Traditional Use of Option Clauses Has Faded?

When we consider how contracts have evolved in the NFL since the advent of the salary cap in 1994, pretty much all NFL contracts have evolved into being functional option contracts anyway, rendering the ideas of options mostly obsolete.

Let’s say, for example, a team signed a player to a three-year deal. If the first two seasons of the contract are fully guaranteed, the team is on the hook for those amounts only. The team can then opt whether to keep or release the player before the third season. Functionally speaking, NFL contracts already have option clauses baked in.

Unless an option includes guaranteed money or significant option bonuses, like the fifth-year option structure, NFL teams could execute the options and then later just cut the player anyway, rendering the option useless.

 

Fifth-Year Options for First-Round Rookies

The only modern option protocol similar to the older traditional way in which options worked in the fifth-year option utilized with players selected in the first round of the NFL draft. The teams can unilaterally elect to extend a player’s contract for one year in exchange for a predetermined fully guaranteed salary during the player’s fifth season.

Every player drafted in the NFL draft’s first round is signed to a four-year deal. The teams then have the option to extend the player for a fifth year. They must make the decision before the start of the fourth season.

 

Melodramatic Option Example: Terrell Owens

While traditional options have faded from the NFL, there have been some unique stand out examples in the post-2000s era. Stand out wide receiver Terrell Owens is one of them—and he’s the one we’d call melodramatic.

Owens was drafted in 1996 by the 49ers. He signed a three-year, $840,000 contract. He then signed a multi-year contract extension after the 1998 season.

This new deal included a three-year team option. Owens would be slated to become a free agent after the 2003 season, but the 49ers could exercise their team option—they had total control. The 49ers would pay him a large bonus in the spring of 2004 (which would be prorated over the next few seasons), and they’d secure the rights for his services for the 2004, 2005, and 2006 seasons.

However, the contract stipulated that if Owens exceeded certain performance incentives, then the option would convert into being a player-option; in this case, the power would switch to Owens’ hands—he would be the one to determine whether those final three years of the contract remained in tact or if they’d be voided.

Owens was a great player for several seasons, and easily earned the player-option. He had the power to keep or void those final three seasons. He famously elected to void the final three years. However, his agent David Joseph made a simple clerical error in the pertinent paperwork, so the final three seasons were never officially voided and Owens did not become a free agent in March 2004 as expected.

Owens demanded the NFL allow for a correction, but the league refused. Owens then demanded that the 49ers trade him to the Eagles, his preferred destination, but the 49ers dealt him to the Ravens instead.

Owens pursued legal action and, after a wild convoluted arduous sequence of events throughout the month of March, Owens was able to reverse the Ravens trade and successfully forced a trade to Philadelphia, joining Donovan McNabb and company in their pursuit of a Super Bowl birth. The start to Owens’ tenure in Philly was awesome, beyond expectations. But it would all come crashing down just a year later because of Owens’ off-the-field antics.

 

Bill O’Brien’s Blunder: DeAndre Hopkins

In 2013, the Texans drafted WR DeAndre Hopkins. He signed a four-year, $7.6 million contract. He later signed a contract extension that would have kept him in Houston through the 2022 season, but the deal included unique option language that later caused confusion and miscommunication between the player and the team.

Hopkins’ base contract included the 2017, 2018, and 2019 seasons. The team could then exercise an option to secure Hopkins’ services for the 2020, 2021, and 2022 seasons at set base salaries. If Houston were to exercise this option, Hopkins would have received $40 million over three seasons (2020–2022), while comparable players were landing new contracts in the range of $60–$65 million for three seasons of service.

Based upon previous conversations, Hopkins was under the impression that the Texans were fully committed to signing him to a new long-term contract. His understanding was that the unique option language was just a placeholder and that he’d ultimately be given the opportunity to ink a more lucrative deal. But the Texans front office was not willing to do so. This caused significant friction between Hopkins and the team.

The biggest sticking point was no guaranteed money. If Hopkins got injured or regressed at any point in the deal, the Texans could release him with no ramifications.

Instead of a negotiating a new deal with Hopkins, who was considered by many to be the best WR in the NFL at that time, the Texans opted to trade Hopkins to the Arizona Cardinals.

The deal with Arizona was orchestrated by then head coach Bill O’Brien—a trade that has been widely considered the worst trade in NFL history. My podcast co-host Walt Cherepinsky of WalterFootball.com called O’Brien the “dumbest man in the NFL.”

The Cardinals inherited the goofy three-year structure from the Texans, but they promptly inked a two-year extension with Hopkins worth $54.5 million with $42.75 million fully guaranteed. Hopkins would be slated to be a Cardinal for five seasons, through the 2024 season, and if he played out the contract he would be paid $94.5 million over five seasons. On an average annual salary basis, Hopkins became the highest paid non-QB in the NFL.

 

Conclusion

Traditional options and option bonuses were a part of the NFL contractual landscape, but that’s no longer the case, with the exception of the fifth-year option for first-round rookies. Option clauses in contracts are not likely to make an NFL comeback anytime soon, but with the increased expectations of guaranteed monies in NFL contracts, options could eventually resurface as a helpful contract mechanism. In the meantime, such options are likely going to remain a staple in the NBA and MLB.