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2023 NBA Trading Guide: How It All Works

In the day and age of social media and the peak of the player empowerment movement, trades and free agency have become as much of a spectacle in the NBA as the games themselves. However, trades in the NBA are often extremely confusing and convoluted. So, in an effort to increase the universal understanding of the recent Damian Lillard and Jrue Holiday trades, and with many more disgruntled stars sure to be moved in the future, here’s a rundown of the mechanics and some of the key terms to understand for NBA trades.

Salary Cap: Salary cap refers to the amount of money a team is allowed to spend on players. Every year, the NBA gives teams a new amount based on a percentage of the revenue the NBA expects to make in a year. This year, that amount has been set at $136.021 million. However, teams are allowed to go over this number with a myriad of complicated exceptions, such as Bird rights and mid-level tax exception, which are more commonly used in the equally complicated free agency. When teams do this, they are forced to pay an extra “tax,” or an escalating fee for going over. 

There are two separate levels of tax; the first is set at $172.436 million, and the second is at $182.794 million. The second level is also more restrictive in the exceptions it allows, and demands a higher fee for each dollar over it is spent. Despite this, the Milwaukee Bucks, Phoenix Suns, LA Clippers, Minnesota Timberwolves, and Golden State Warriors all have gone over that second tax apron.

How does this relate to trades? If a team has gone over the cap and is considered a taxpayer, they are not allowed to make trades that give them a return of more than 125% of what they are giving away, plus $100,000 for the first apron. For second apron teams, that decreases to 110%. So, for example, if Player A, who makes $20 million a year, is getting traded, the player or players he gets traded for could not have a combined salary exceeding $22.1 million if Player A played for one of the five teams listed above. 

Because of this, trades become more of a mathematical equation for general managers than actually getting exactly what they want. Often, players have to be thrown into trades purely because of salary matching reasons. So how can teams make fair trades if it’s nearly impossible to do with just players?

Trade Exception: The most obvious alternative to giving up a player for a player is giving up a player for cold, hard cash.

So technically it’s not actually physical cash, but if it isn’t clear already, money is a massive commodity in a world ruled by the salary cap. Unlike teams who have entered the tax-paying realm, teams under the tax are allowed to take on salary in return until they hit the cap. Because of this, when a team offloads a player to another team under the cap with few or no players in return, the team who offloads the player gets a trade exception. Importantly, only teams who are over the cap are able to get trade exceptions.

For instance, this offseason saw the Dallas Mavericks trade Davis Bertans and the 10th overall pick to the Oklahoma City Thunder for the 12th overall pick and a $17.5 million trade exception, possible because the Thunder are under the cap, and the Mavericks are over it. Soon after, the Mavericks were able to use this trade exception to persuade the Sacramento Kings to part with Richaun Holmes and the 24th overall pick, thus relieving the Kings of Holmes’s massive $15 million contract.

The takeaway from this example is draft picks are the most valuable asset in NBA trades. Trade exceptions are often used as a means for teams under the cap to gain a draft pick from a team over the cap looking to jettison a bad contract. But what about draft picks makes them so coveted by NBA teams?

Draft Picks: The answer: potential. Teams like the idea of being able to control their own destiny by picking the next face of their franchise in the draft. Logically, the more picks you have, the higher the probability of picking your next big star. This is made even more enticing when the team they are trading with has the potential to be bad at the time of the picks that they’ve traded.

For example, in the massive Kevin Durant deal with the Suns late last season, the Brooklyn Nets got the Suns’ first-round picks in 2023, 2025, 2027, and 2029 (alternating because of the Stepien Rule, which prevents teams from trading consecutive first-round picks.) The Nets are betting that by the time 2027 rolls around, the Suns will have lost most of the pieces that promise to make them a championship contender now, which would mean that the pick they will get would normally be a pretty high draft pick for the Suns. However, since Brooklyn now owns that pick, it would be the Nets who would be drafting high, even if, by 2027, the Nets are the ones competing for championships.

There are mechanics that allow for teams to protect their draft pick from teams if it lands them a higher spot in the draft. For instance, when the Dallas Mavericks traded a 2023 first-round pick to the New York Knicks for Kristaps Porzingis in 2019, they included the condition that if the draft pick were to fall into the top 10 picks of the draft, the Mavericks would keep the pick. So, when the Mavericks landed the 10th pick in this past year’s draft, they got to keep the pick.

There is another way to trade draft picks. Pick swaps have become an increasingly popular form of including picks in trades because it involves little risk for the team who the draft swap rights are being traded to, while also allowing the team to know that they won’t be losing a first-round pick entirely.

 For instance, when the Cleveland Cavaliers traded for Donavan Mitchell in the 2022 offseason, part of the haul they gave the Utah Jazz were two pick swaps for 2026 and 2028. A major reason for this is subverting the Stepien Rule, as they also traded their first-round picks for 2025, 2027 and 2029. However, it also gives Utah options during those years. If the Jazz are contenders in 2026 and 2028, but the Cavaliers have fallen from contention, Utah is able to claim Cleveland’s higher pick, with the Cavaliers left with the consolation prize of Utah’s pick in that draft.

Teams also like draft picks because they allow teams to put valuable assets into a trade without affecting how the salaries are matching up, as they do not carry a dollar amount. Picks are also able to be swapped endlessly until the draft they are in, which is not always true of the players being traded. This is why when trades happen in the NBA, draft picks typically are thrown around en masse and why they have become the most valuable asset in the NBA.

Putting It Together: So how do all of these concepts come into play in the recent Damian Lillard blockbuster? Though trade exceptions were not a part of the deal, salary cap math and draft picks played a large role.

For the salary cap part, there is a lot of tricky pieces being moved because the trade involves three separate teams. However, it is a little simpler to see once you look at how much salary each team is sending out versus taking on.

The Portland Trail Blazers, between Lillard, Jusuf Nurkic, Nassir Little, and Keon Johnson, are sending out approximately $63.55 million, while taking in a combined $68.2 million from Jrue Holiday, Deandre Ayton, and Toumani Camara, which is under 110% of what they sent out.

The Milwaukee Bucks, in sending out Holiday and Grayson Allen, parted with approximately $43.2 million, nearly matching their return of Lillard’s $42.5 million salary.

And finally, the Phoenix Suns, gave Portland $33.6 million worth of salary between Ayton and Camara, while receiving $29.85 million from Allen, Nurkic, Little and Johnson, saving them money.

The math seems complicated based on how many players are involved, but once it is boiled down to simple input and output, it can be made much simpler.

On top of these salary cap gymnastics, Milwaukee sent Portland one coveted first-round draft pick in 2029, with two pick swaps in 2028 and 2030 (again, subverting the Stepien Rule.) Though that return in draft capital seems minimal compared to other recent blockbusters, it comes with the caveat that the Trail Blazers traded Holiday to the Boston Celtics just days later for two more first-rounders, one next year and another in 2029.

Want to test your new salary cap skills? The players the Celtics gave up on top of the two draft picks were Malcolm Brogdon and Robert Williams. See how their salaries combined stack up to Jrue Holiday’s salary of $36.9 million.

Suddenly, a seemingly convoluted trade becomes a bit clearer, with reasons for trading certain players that don’t seem to move the needle much (namely Camara and Johson) making more sense in the calculus of the NBA trade machine. And with many more massive trades like this on the horizon, hopefully, this little guide makes the overwhelming amount of assets dealt seem a little less intimidating to wade through.

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