The Rockets announced Friday they have exercised the fourth-year team option on Reed Sheppard’s rookie contract.

Sheppard, the third overall pick in the 2024 draft, will make $14.04 million during the 2027-28 season. He will be eligible for a rookie contract extension this summer.

The 22-year-old is averaging 10.5 points per game this season after averaging 13.5 points last season, when he appeared in all 82 games. He shot 39.4% from behind the three-point line and finished sixth in Sixth Man of the Year voting.

“Just a steady force of the offensive side of the ball,” Rockets forward Kevin Durant said after Sheppard scored 13 points against the Hawks on Monday. “Bringing the ball up, and defense has got to respect him out to the three-point line. I think he’s doing a great job getting hands on basketballs, on deflections, staying in front of his man, not fouling. Reed is playing great ball, and we’re going to need that from him moving forward.”

Sheppard was the 10th first-round pick the Rockets made from 2021-24. He is the sixth of those 10 players to have his fourth-year option exercised by the team. The previous five — Jalen Green, Alperen Sengun, Jabari Smith Jr., Tari Eason and Amen Thompson — all signed contract extensions with Houston.

The Rockets traded 2021 first-round picks Josh Christopher and Usman Garuba and 2023 first-round pick Cam Whitmore after their second NBA seasons. The team dealt 2022 first-round pick TyTy Washington after his rookie season.

Sheppard has become a mainstay in the Rockets’ rotation after a challenging rookie season. He went from serving as Fred VanVleet’s backup at point guard to falling completely out of the rotation. He also spent three games with the Rockets’ G League affiliate in Rio Grande Valley in January 2025 to get additional playing time.

Still finding his role

The Rockets believe Sheppard can still play point guard at the NBA level, but he has mostly played off the ball through four games this season with VanVleet back and Marcus Smart joining the team as a free agent.

“I think he’s a guy that has to improve in the pick and roll,” Rockets head coach Ime Udoka said on media day. “Playing him off ball is something he’s done his whole life, and he’s really good at it.”

Sheppard will miss Friday’s game against the Dallas Mavericks because of low back soreness. He also missed the Rockets’ Oct. 23 win in San Antonio because of an illness.