Orlando chose the latter.
The Magic would be wise to eat the entire $1 million this season rather than stretching it. They’re headed toward the lottery anyway, and that flexibility would be better served in future years.
Even without Watson, Orlando has plenty of depth at point guard between Elfrid Payton, D.J. Augustin and newly signed Shelvin Mack. None of those players are necessarily good, but neither was Watson. Better to clear the cap space and roster spot.