For as good as the Jose Alvarado trade continues to look, the New York Knicks will not understand the full scope of its impact until they know what he’s doing with his 2026-27 player option.
The 27-year-old steals machine is currently a bargain. His $4.5 million salary comes out to just over 2.9 percent of the salary cap. That is bonkers value for an elite point-of-attack defender who can hit threes, and has been one of the Knicks’ most valuable rotation weapons since arriving from New Orleans.
Insane bargains do not stay that way forever, though. Alvarado is worth more than the $4.5 million player option he holds for next season, and isn’t necessarily someone who’d consider delaying a payday.
After this year, he’ll have made under $12 million for his entire career. Going on 28, knowing the mercurial aging curve for small guards, this could be his first and last chance to get seriously paid. And if that compels him to opt out, it may turn out that New York just acquired a rental.
The Knicks can pay Jose Alvarado, but might not want to
Bankrolling Alvarado’s next salary is not technically an issue. The Knicks will have his full Bird rights if he opts out. They do not have to worry about their cap situation limiting what they can pay him relative to other teams.
At the same time, the front office is absolutely going to worry. New York is barreling toward second-apron territory. Right now, they have $17.6 million in room beneath it next season. That is assuming Alvarado picks up his player option, and does not include salaries for Mitchell Robinson, Landry Shamet, or this year’s first-round pick.
In the event Alvarado hits the open market, the Knicks will be $22.1 million below the second apron, with just eight players under contract. That probably isn’t even enough wiggle room to keep two of Robinson, Shamet and Alvarado while filling out the rest of the roster.
Diving into the second apron should not be considered taboo—provided New York is a true-blue contender. That much remains debatable even among the Knicks themselves. But the roster restrictions that come with entering the second apron are punitive. Most critically, New York would not have access to the mini mid-level exception, and could not aggregate salaries in prospective trades. The latter would be particularly problematic if it plans to pursue a deal for Giannis Antetokounmpo.
Jose Alvarado’s arrival could have a trickle-down effect
Convincing Alvarado to opt in, and then signing him to an extension is likely the Knicks’ preferred scenario. Alvarado would be eligible to ink the same deal this coming summer as Deuce McBride if he picks up his player option: a four-year pact worth up to $95 million. (The seasons and dollar amount are fungible. Four years for $95 million is simply the max.)
Failing that, if Alvarado opts out, New York may be forced to make some tough decisions. It might need to choose between him and Robinson, or between him and Shamet. Heck, it may end up keeping only one of the three. And if the Knicks do pay Alvarado, it immediately brings McBride’s future into question.
It’s much too early to know how this all plays out. It’s never too early to think about. The Alvarado trade looks great, if necessary, now. But the final verdict can’t be rendered until we know what happens with his player option.