Ed Werder of ESPN reported Friday that the Texans had begun "very preliminary" negotiations over a long-term extension and that they were turning their focus toward Watson after securing Laremy Tunsil's new deal.
Texans head coach Bill O'Brien addressed the situation Saturday, per the Houston Chronicle's Aaron Wilson: "Anytime we can get something done with Deshaun, that would be great. We have a great relationship with Deshaun and his agent. We obviously want Deshaun to be our quarterback for a long time."
Picking up the team option was a no-brainer after Watson threw for 3,852 yards, 26 touchdowns and 12 interceptions in 2019.
Houston doesn't really have to start worrying about potentially losing him until at least 2023. Even in the event the two sides don't hammer out a new deal before then, the team could use the franchise tag to ensure he sticks around in 2022.
The Texans have a strong incentive to get things finalized soon, though.
Patrick Mahomes will almost certainly reset the quarterback market if he signs a long-term contract with the Kansas City Chiefs. ESPN's Adam Schefter reported in January 2019 that Mahomes' price tag could eclipse $200 million, and that figure probably isn't coming down after he led Kansas City to a Super Bowl title.
NFL Network's Tom Pelissero reported April 3 that Mahomes and the Chiefs could hash things out after the draft:
Nobody expects Watson to get a higher salary than Mahomes. Mahomes' deal is bound to inflate the quarterback market, though, raising the financial bar for his colleagues, and he's such an outlier that the consequences could be even more far-reaching.
Watson's representatives might have a hard time arguing he should move ahead of Wilson to become the best-paid player in the league. If Mahomes is making $40 million-plus a year, on the other hand, commanding upward of $35 million or $36 million annually becomes an easier sell.