You hold square whenever you want, there's no really timing for it. As long as square/X is held before they get to the rim and being the ball down.
And honestly, I'd had to catch about 15, maybe 20 in myCareer so far lol. Sometimes the AI would just pass it, but when they know you can finish it, they'll throw it. Sometimes they'll throw it in traffic. Like I did this Blackfoot cut when Dragic was coming up the court and caught a lob that way. It's all about situations and how fast you can tap the button twice.
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