Traded Player Exception

June 19 2012 at 2:15pm CDT By Luke Adams

While many of us may prefer to simply rely on ESPN.com's Trade Machine to figure out whether or not a trade will work under NBA rules, it's worth examining the primary CBA detail that ESPN's tool uses to determine a trade's viability — the traded player exception. If a team makes a deal that will leave its total salary more than $100K above the salary cap, the club can use a traded player exception to ensure the trade is legal under CBA guidelines.

There are two different types of traded player exceptions used in NBA deals. One applies to simultaneous trades, while the other applies to non-simultaneous deals. In a simultaneous trade, a team can send out multiple players and can acquire more salary than it gives up. In a non-simultaneous trade, only a single player can be dealt, and the team has a year to take back up to that player's salary amount, plus $100K. Let's look into each scenario in greater detail….

In a simultaneous trade, different rules applies to taxpaying and non-taxpaying clubs. A non-taxpaying team can trade one or more players and take back….

  • 150% of the outgoing salary (plus $100K), for any amount up to $9.8MM.
  • The outgoing salary plus $5MM, for any amount between $9.8MM and $19.6MM.
  • 125% of the outgoing salary (plus $100K), for any amount above $19.6MM.

Here's an example of the above rules in effect from this season's trade deadline:

The Blazers traded Gerald Wallace ($9.5MM) to the Nets for multiple players. Because the outgoing salary amounted to less than $9.8MM, Portland could have taken back up to $14.35MM in the deal — 150% (plus $100K) of Wallace's salary. The Blazers received Mehmet Okur ($10.89MM) and Shawne Williams ($3MM), whose salaries totaled $13.89MM, which fit in below the $14.35MM mark.

If Wallace's salary had been $10MM, the Blazers could have received up to $15MM in return (Wallace's salary plus $5MM). If his salary had been $20MM, Portland could have received up to $25.1MM in return (125% of Wallace's salary, plus $100K).

For taxpaying teams, the rules are simpler, albeit more restrictive: A taxpaying club can send out one or more players and take back 125% of the outgoing salary, plus $100K. For instance, when the Lakers traded Derek Fisher and his $3.4MM salary to Houston, they would have been allowed to take back up to $4.35MM.

In simultaneous transactions, the traded player exception is used to instantly complete the deal. There are no lingering loose ends in simultaneous trades. Our list of outstanding traded player exceptions comes as a result of non-simultaneous deals.

In non-simultaneous deals, a team can trade away a single player without immediately taking salary back in return. The team then has up to one year in which it can acquire multiple players whose salaries amount to no more than the traded player's salary (plus $100K).

For instance, when the Lakers traded Lamar Odom and his $8.9MM salary to the Mavericks in December for a first-round pick, it created a traded player exception worth $8.9MM. The Lakers have until next December to acquire one or more players whose salaries total up to $9MM ($8.9MM + $100K). If Los Angeles doesn't use the full trade exception within a year, it expires.

When evaluating an NBA trade, it's worth noting that the two teams can view the deal entirely differently. For example, one team could consider a trade simultaneous, while the other team breaks the transaction down into two separate trades, one simultaneous and one non-simultaneous. Let's take a look at a real-life example from this year's trade deadline: the Bucks' trade of Andrew Bogut and Stephen Jackson to the Warriors for Monta Ellis, Ekpe Udoh, and Kwame Brown.

From the Bucks' perspective, the trade broke down as follows:

  • Bogut ($12MM) for Ellis ($11MM) and Udoh ($3.29MM). As a nontaxpayer, the Bucks could have absorbed up to $17MM (100% of Bogut's salary + $5MM) in a simultaneous deal for Bogut, so Ellis' and Udoh's $14.29MM fits comfortably.
  • Jackson ($9.26MM) for Brown ($6.75MM). This segment of the deal is non-simultaneous, meaning the Bucks received a traded player exception for the difference between the two salaries ($2,506,500). They'll have until next March to use it.

And here's how it looked from the Warriors' perspective:

  • Ellis ($11MM) for Bogut ($12MM). The Warriors could have taken back up to $16MM for Ellis (100% of his $11MM salary + $5MM), so they can easily absorb Bogut's $12MM salary.
  • Brown ($6.75MM) for Jackson ($9.26MM). In this case, the Warriors could take up to 150% of Brown's salary, plus $100K, which would have been nearly $10.23MM, more than enough to absorb Jackson's $9.26MM figure.
  • Udoh is left over and is essentially going to the Bucks for nothing, from Golden State's perspective. So the Warriors received a traded player exception worth Udoh's salary ($3,294,960), which they'll have until next March to use.

For salary-matching purposes, draft picks and players on minimum-salary contracts aren't taken into consideration. For instance, if a non-taxpaying team was sending out $5MM in a simultaneous deal, it could take back $7.6MM (150% of $5MM, plus $100K), and receive one or more minimum-salary players or draft picks in the deal.

The traded player exception is one of the CBA's trickier details, and makes it challenging for over-the-cap teams to navigate the trade market. It's undoubtedly simpler to use ESPN's Trade Machine to determine whether a deal is legal, but examining the rules and figuring out exactly how a blockbuster trade breaks down can provide rewarding insight into an NBA club's management of its cap.

Note: This is a Hoops Rumors Glossary entry. Our glossary posts will explain specific rules relating to trades, free agency, or other aspects of the NBA's Collective Bargaining Agreement. Larry Coon's Salary Cap FAQ was used in the creation of this post.

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