NBA Salary Cap - Sign and Trade Agreements

Sign and Trade Agreements

When a team is willing to sign an upcoming free agent, but the player's current team wants something in return, it might be in the best interest of both clubs to execute a sign-and-trade deal. This occurs when one team signs one of its free agents and immediately trades that player to another team. A sign-and-trade is beneficial to both the player and the teams; the player receives a bigger contract than he might ordinarily get from a team that he would like to play for, while the trading club gets something in return for a free agent, and the recipient of the trade gets the player they desire. Sign-and-trades are a reality in the NBA because of the CBA's rules: unlike baseball, where teams losing free agents are compensated with draft picks or cash, NBA teams that lose free agents receive no compensation.

When a team initiates a sign-and-trade agreement, it must trade the signed player immediately; teams cannot renege on the arrangement and keep the player for themselves, using the other team's financial situation to leverage the signee into a more favorable deal for themselves. Also, the contract signed before the trade must be for at least 3 years, with the first year guaranteed.

If a newly-signed player is not part of a sign-and-trade, his new team cannot trade him until December 15 of the calendar year in which he was signed or three months after the date on which he signed, whichever arrives later.

Under the 2011 CBA, the signed player must have been on the roster of his previous team at the end of the last regular season. Previous agreements allowed teams to sign-and-trade any player to whom they held Bird rights, which do not automatically disappear with a player's retirement—for example, in July 2012, the Los Angeles Lakers still held Bird rights to John Salley, who retired in 2000. In the 2007–08 season, two teams used sign-and-trades on players who had been out of the league. The Dallas Mavericks signed Keith Van Horn out of retirement as part of a package to acquire Jason Kidd, and the Lakers did the same with Aaron McKie to facilitate their deal for Pau Gasol.