Explaining the 5th Year Option

[KendrickPanther]

One of the behind the scenes factors in the draft since 2011 has been the coveted 5th year option. It's coming to the forefront as the first wave rookies have had their 5th year options exercised.

 

-Teams that pick 1-10 have the option to retain a player for a 5th year. Compensation is based on the 10 highest paid players at their position or 120% of their current salary. This is identical to the transition tag.

 

-Teams that pick 11-32 have the option to retain a player for a 5th year. I could not find exact numbers but the compensation is a modest raise compared to 1-10.

 

-If a team trades a player drafted 1-32 their new team has the right to use the 5th year option. If a player is cut and signed as a free agent there is no option.

 

What this means:

 

Cam Newton's 5th year option will pay him $14.67 million based on the transition tag.

 

Compare that to JJ Watt, Defensive End chosen 11th overall in the same draft who will be paid $6.969m.

 

Christian Ponder, Quarterback chosen 12th overall would have been paid $9.686m but the Vikings declined to use the option.

 

Why this matters:

 

Aside from the cap space it creates in year 5 it gives teams a powerful bargaining chip to complete a long term deal. JJ Watt is probably worth double or even triple the salary he will earn for the next 2 seasons. He has incentive to get a long term deal done to raise his salary and secure his future even if he doesn't get top dollar.

 

How this affects the 2014 Draft:

There are no consensus "elite" Quarterbacks in this years draft. A team like the St. Louis Rams has the 2nd overall pick and the 13th overall pick. If you feel good about a QB but not great, you take him outside the top 10 and give yourself more flexibility when it's time to make a decision on the 5th year option. Keep in mind, Cam Newton, Russel Wilson, Andrew Luck, RG3, Colin Kaepernick, and Andy Dalton could all sign mega deals in the next 3 years and raise that transition tag well above the $14.67 million Cam is getting.

 

There will also be a period at the end of the 1st round where teams try to trade up and draft players for that 5th year option. This puts the Panthers in play for a trade down.

 

How this affects the Panthers:

I've already covered Cam Newton but Luke Kuechly was also drafted in the top 10. Luke's 5th year will be the average of the top 10 Middle Linebackers. This should be a reasonable number as middle linebackers do not sign blockbuster deals as frequently as pass rushers and quarterbacks. Star was chosen 14th overall and will only get a modest raise in year 5.

 

How this changes the draft: This really rewards teams that choose good players. JJ Watt for $6.96m in the prime of his career? Amazing. If you make a bad selection like Mark Ingram or Christian Ponder there is no penalty, just lost opportunity. I bet the 49ers wish they had chosen Colin Kaepernick 32nd overall instead of 36th. They will have to create cap space a year sooner than other teams.

[The Huddler]

Lol I laughed so hard when the Vikings took Ponder. Lol and my viking friend all optimistic and explaining how his flaws aren't big and he can be a great QB. LOL

[LinvilleGorge]

Lol I laughed so hard when the Vikings took Ponder. Lol and my viking friend all optimistic and explaining how his flaws aren't big and he can be a great QB. LOL

 

This.  It blew my mind that he was talked about as a 1st round QB prospect leading up to the draft then it completely floored me when he ended up going #12 overall.  WTF???

[KendrickPanther]

This.  It blew my mind that he was talked about as a 1st round QB prospect leading up to the draft then it completely floored me when he ended up going #12 overall.  WTF???

 

Yeah I was shocked. Watched him in college and never felt like I was watching an NFL talent.

[Boltergeist]

according to the CBA the 5th year option for 11-32 1st rounders is the avg salaries of hose ranked 3-25 at their position