A player option is a contract year the player, not the team, can choose to pick up or decline. Declining makes them a free agent a year early; picking it up keeps them under the existing deal.
In HoopSim you can attach a player option to the final year of any free-agent offer of two years or more, and it is decided in the offseason before free agency opens. The player decides from their own read of the market: a player who thinks they can earn more declines, a player happy with their deal or wary of the market picks it up. You get an inbox note and word from your capologist either way. Offering a player option is a way to make a bid more attractive to a free agent who wants flexibility. An undecided option year is not guaranteed money.
Rulebook: Options. Related: team option, unrestricted free agent.