The New York Knicks are considering whether to exercise their right of first refusal, retain their rights to free agent forward Bernard King, then try to make a trade with the Washington Bullets, according to their coach, Rick Pitino.

If the Knicks match the Bullets' offer to King, believed to be a two-year deal at a fully guaranteed salary of between $900,000 and $1.2 million per year, it would be in the hopes of getting what they consider "just compensation."

"Obviously from the figures being used, Washington feels comfortable that they would be signing the old Bernard King," said Pitino in a telephone conversation from Los Angeles, where his team is playing an exhibition game today. "If that's the case, then we would expect to receive compensation for an all-star player."

He admitted, however, that the Bullets "have us over a barrel to a degree." That's because earlier this month, the Knicks told King, 30, that they weren't interested in re-signing him. Instead, they gave an offer sheet to Detroit forward Sidney Green that is believed to be for three to five years at more than $800,000 per year.

The Pistons matched that offer last week, but the teams are discussing a trade. If the Knicks were to match the Bullets' offer and keep King, paying Green would put them over the NBA's salary cap. The Knicks could not match the Bullets' offer and then trade King to any team other than the Bullets. That's because the Bullets included a no-trade clause in their offer. King would have to waive that clause before he could be dealt. He and his lawyer, Bob Woolf, have stated that Washington is the only place that would be acceptable.

However, Pitino cautioned: "We thought we had the same thing with Detroit for Sid Green and we still haven't gotten him . . . we didn't think there was any way Detroit would match, but they did. With Bernard, if it's a matter of getting nothing for an all-star player then we may have to look differently at the situation."

The Knicks have until Oct. 31 -- 15 days from the time the offer sheet was signed and delivered to the team -- to decide if they will match the package. According to Pitino, although the Bullets had told the team they were considering extending an offer to King, the Knicks were surprised at the size of the offer.

If the Knicks do match the deal, many NBA observers feel that it would be strictly a tactical move, solely to get something in return for King, the league's leading scorer in the 1984-85 season. It has been rumored that Washington has already offered New York a second-round pick for King, but Pitino could not confirm it.

If true, that would be another indication of Washington's strength in the situation. Should the Knicks try to force the Bullets to give up more than they were willing to, a stalemate would result. According to Pitino, Bullets General Manager Bob Ferry and Knicks General Manager Al Bianchi, recently had engaged in trade talks but they didn't involve King.

It's likely the Knicks' focus would be on a player who could help them immediately. Before training camp, it was rumored that the teams had discussed a trade of forwards Pat Cummings for Terry Catledge, but the Bullets weren't interested. The Knicks also are said to be interested in second-year forward John Williams.

That's not to say that Washington isn't interested in moving a player from its roster to New York's. When told of the team's offer sheet to King, one Washington starter approved but added: "We've got to make a deal to get people off our roster."

If King joins the team and holdout free agent Charles Jones rejoins the Bullets, there would be a glut at small forward. The player most likely to go would be Jay Vincent. A seven-year veteran, he joined the Bullets last season from Dallas but missed the first 30 games with a ruptured tendon in his hand. In the offseason, Washington packaged him in a proposed trade with the Denver Nuggets. The Knicks, according to the team official, were said to be making inquiries about Vincent's health and level of play.

"It comes down to their right to match, then it's like anything else," Ferry said Saturday. "Nothing is sure with an offer sheet. What they {the Knicks} are going to do is a decision they have to make for themselves."

The only certainty is that the terms of the offer sheet will set King's salary for the 1987-88 season -- regardless of what team he plays for.