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Financial Facts for NBA Trades, Free Agency, & the Draft

Financial Facts for NBA Trades, Free Agency, & the Draft

With the NBA now officially in offseason mode, we’ll take a quick look at some facts and figures for the upcoming draft & free agency seasons, just around the corner.

  • The projected league salary cap is $101M, up just $2M from last season.
  • 6PM EST on June 20th (day before the draft) the draft picks lock meaning any trades that happen will have to be done post-draft. Teams will draft players in their original slots then trade them accordingly after the fact. (i.e,: Kobe Bryant, traded from Charlotte to LA)
  • Player/Club/ETO Option Decisions must be confirmed by June 29th
  • Trades that are processed before July 1st use 2017-18 salaries. Anything after uses 2018-19.
  • Negotiations: July 1st (midnight) - July 6th (noon) is a “negotiating” period for upcoming free agents.
  • Official transactions (signings & trades can’t become official until July, 6th, Noon EST)
  • The trade deadline for 2018-19 will be early February.
 

The Draft

The upcoming NBA Draft (June 21st), consist of two rounds, the first of which contains a rookie wage scale for its contracts. First-Round selections will sign a 2-year contract, with two additional club options to follow. Based on league salary cap projections for the upcoming season, the #1 overall pick will sign a 2-year, $17.5M contract, that includes a cap hit of around $8M for 2018-19. You can view the complete list of projected deals at our NBA Draft Tracker: http://www.spotrac.com/nba/draft/

Second round picks are not subject to a scale, and often come in at or around the minimum salary for the given year. Teams can (and have) find incredible value in players here.

 

Trades

When is a player eligible for a trade? Here’s a few of the more prominent restrictions:

  • Free agent signings must wait 3 months, or until December 15th, whichever comes first.
  • Players who are traded must wait 2 months before being traded again
  • Players who sign a Super-Max Extension must wait 1 full year

Trade then Sign

Players who are traded cannot sign a major/maximum extension with their new team for 6 months (i.e. Chris Paul in Houston last year).

Trade Math

Without getting ridiculously specific with all the scenarios (and there are a few), the most important thing to make note of here is that when a trade happens, the money going out must be relatively close to the money coming in, for all teams. In most cases, teams can bring back 125% of the salary they’re sending out, plus $100,000. For example, the Cavaliers would be able to acquire salaries totaling a maximum of $44.6M in trading LeBron James and his $35.6M salary in 2018-19.

 

Restricted Free Agency

Notable RFAS: Julius Randle (LAL), Clint Capela (HOU), Aaron Gordon (ORL) Marcus Smart (BOS), Jusuf Nurkic (POR)

Teams have until June 29th to tender their current restricted free agents. Players can sign the offer, or hold out for offer sheets. If a tender is not offered, the player becomes unrestricted on July 1st.

Teams can place agreement offer sheets starting July 1st. The current team has 48-hours to match an offer sheet, starting at noon July 6th (official signing period).

 

LeBron

We’ll all know a little more about LeBron’s future in the next 10 days, based upon his decision for the $35.6M player option he holds. Should he “opt-in”, the attention will turn to trade possibilities, even if his intention is to play out 2018-19 in Cleveland. LeBron can’t currently be traded, because he has the ability to terminate his option year. Once he opts-in, he’ll become trade eligible through the February deadline. Were he to opt-out, he’ll become an unrestricted free agent and can begin negotiating with teams July 1st (but speaking with other players immediately).

 

Kawhi Leonard

If it’s done prior to July 1st, the formula is based on 2017-18 salaries ($18.8M). Based on the threshold, San Antonio can bring back trade pieces at a maximum of $23.8M. Should they wait until the new league year, the math would run off of his $20M salary for the upcoming season, meaning San Antonio would be allowed to bring back $25M in salary.

Draft picks do not factor into the formula at all. They are simply assets when dealing with a trade. 

These come into play specifically when a situation is lopsided in one direction, even though financially it follows the rules. Let’s say Kawhi Leonard is dealt to Washington for John Wall. Because Wall signed a super-max extension last July 26th, the Wizards must wait a full year before shipping him elsewhere. His 2018-19 salary is $19,169,800, and the Wizards are over the tax threshold, meaning they can assume a trade worth a maximum of $24M for John Wall. This means there’s room and then some for Leonard’s $20M salary. Because Wall is already extended through 2022, it’s likely San Antonio would have to package another player and/or a draft pick to even out the transaction.

 

Kyrie Irving

After forcing himself out of Cleveland, the 26-year-old was a veteran leader for a young Celtics team for 60 games, before injury ended his season. Irving holds an identical contract situation to Kawhi ($20M salary in 2018-19, $21M player option for 2019-20), so this would be a mathematically allowable “rental for rental” deal. Both players will be opting out next summer to position themselves for a major payday with another cap increase.

 

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