Each year when the offseason rolls around, a ton of NBA free agents sign new contracts and teams around the league consummate trades. On a few occasions, these two forms of transactions are combined into something called a sign-and-trade deal. Sign-and-trades occur when a team re-signs its own free agent, only to immediately send him to another team in exchange for players, draft picks, and/or cash.
In order for a sign-and-trade deal to be completed, the following criteria must be met:
- A free agent must be signed-and-traded by the team with whom he finished the season. For instance, the Cavaliers could sign-and-trade Tristan Thompson this offseason, but another team couldn’t sign Thompson and immediately move him.
- If the free agent is restricted, he can’t be signed-and-traded after he signs an offer sheet with a rival team.
- A team acquiring a player via sign-and-trade cannot be over the tax apron after the deal, and can’t have used the taxpayer mid-level exception.
- A free agent can’t be signed-and-traded once the regular season is underway.
- A free agent can’t be signed using the mid-level exception or any exception that doesn’t allow for a three-year contract.
- A player receiving a designated veteran contract can’t be signed-and-traded.
Sign-and-trade contracts can be worth any amount up to the player’s maximum salary (with 5% annual raises), and must be for either three or four years. However, only the first year of the deal has to be fully guaranteed.
If a sign-and-trade contract includes a signing bonus, either team can agree to pay it, though if the signing team pays it, it counts toward that club’s limit for cash included in trades for that league year. As for trade bonuses, they would kick in upon any subsequent trades rather than as part of the sign-and-trade transaction itself.
Under some previous Collective Bargaining Agreements, there was more incentive for players to work out sign-and-trade deals, since the contract restrictions weren’t as strict. For example, when Anthony Davis hits free agency this offseason, he’d be eligible for a five-year contract worth up to a projected $200MM if he re-signs with the Lakers, but only four years and approximately $148MM with another team (note: those estimates are based on a $115MM cap projection that now appears unlikely).
Prior to 2011’s CBA agreement, Davis could have received that more lucrative five-year deal even if Los Angeles had signed-and-traded him. But in the unlikely event that the Lakers sign-and-trade Davis this offseason, he’d only be eligible for that four-year, $148MM max.
Under the current CBA, there’s less incentive for teams and players to participate in sign-and-trades. Generally, if a player wants to change teams, it makes more sense for him to sign with the new team outright, rather than making that club give up assets to complete the acquisition. Even the player’s old team may prefer to simply let the free agent walk and claim the resulting cap space, rather than taking back unwanted assets in a sign-and-trade.
There are other roadblocks as well. A team acquiring a player via sign-and-trade subsequently becomes hard-capped for the rest of that league year. Plus, a signed-and-traded player’s salary may be viewed differently than it would be in a standard trade for salary-matching purposes, which can compromise a team’s ability to meet those salary-matching requirements.
However, if a potential suitor is over the cap and under the tax, a sign-and-trade can make sense — especially if that club wants to sign the player for more than the mid-level amount, or if the club can offer the free agent’s prior team something of value.
During the 2019 offseason, sign-and-trades made a comeback in a big way. After just four sign-and-trade deals were completed between 2015-18, a total of 10 players were signed-and-traded last July.
In some cases, those sign-and-trades were a result of teams opting to get something back for restricted free agents who may have signed offer sheets elsewhere (ie. Malcolm Brogdon, Tomas Satoransky, Delon Wright). In other instances, clubs losing maximum-salary free agents turned those deals into sign-and-trades in order to get something back for their departing stars (ie. D’Angelo Russell for Kevin Durant; Terry Rozier for Kemba Walker).
It’s not clear if sign-and-trades will continue to be quite so popular going forward or if a confluence of factors made 2019 an outlier. Still, last summer’s deals provided a blueprint for how sign-and-trade deals can benefit all parties in the right situation.
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.
Earlier version of this post were published in 2013 and 2019 by Luke Adams.