Hoops Rumors Originals

Each summer when the NBA offseason arrives, a multitude of free agents sign new contracts and teams around the league consummate dozens of trades. On some occasions, these two forms of transactions are combined into something called a sign-and-trade deal.

What is a sign-and-trade?

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. For the most part, they function like a normal NBA trade, except one of the pieces involved in the trade is a free agent who receives a new contract as part of the deal.

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 most recent season. For instance, the Cavaliers could sign-and-trade Isaac Okoro this offseason, but another team couldn’t sign Okoro and immediately move him. Cleveland also wouldn’t be permitted to sign-and-trade Raul Neto, even though the Cavs were his most recent team, because he finished the 2022/23 season with the club, rather than the ’23/24 season.
• 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 first tax apron upon the conclusion of the deal and becomes hard-capped at the first apron for the rest of the league year.
• A free agent can’t be signed-and-traded once the regular season is underway.
• A free agent can’t be signed-and-traded using 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 must cover either three or four seasons. However, only the first year of the deal needs to be fully guaranteed.

A sign-and-trade contract can be worth any amount up to the player’s maximum salary (with 5% annual raises) for a player who has full Bird rights. However, players with Non-Bird or Early Bird rights are subject to the restrictions of those exceptions.

For example, a player who only has Non-Bird rights and is signed-and-traded would be limited to a first-year salary worth up to 120% of his previous salary, 120% of his minimum salary, or the amount of his qualifying offer (if the player is a restricted free agent)

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, so that’s uncommon. If a trade bonus is included, it would kick in upon any subsequent trade rather than as part of the sign-and-trade transaction itself.

The benefits and challenges of the sign-and-trade

Prior to the NBA’s 2011 Collective Bargaining Agreement, a free agent could receive a five-year contract via sign-and-trade, but that’s no longer the case — the contract restrictions for players acquired via sign-and-trade are the same as those that apply to a player signing outright with a new team via cap room (four years and 5% raises).

The goal of that change was to encourage top free agents to remain with their own clubs in order to maximize their earnings, rather than allowing them to sign similarly lucrative long-term contracts while changing teams.

In more recent CBAs, including the 2023 agreement, a specific set of circumstances is often required for teams and players to be incentivized to participate in sign-and-trades. If a player wants to change teams, it often 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 potential roadblocks complicating sign-and-trade deals as well. A signed-and-traded player’s salary may be viewed differently for salary-matching purposes than it would be in a standard trade, which can compromise a team’s ability to meet those salary-matching requirements. We outline those rules in our glossary entry on base year compensation.

However, if a potential suitor is operating over the cap and under the first apron, 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.

Sign-and-trades can also come in handy when a team needs to aggregate one more contract in a trade for salary-matching purposes, or when a team that has already used its mid-level exception wants to add a second free agent in that mid-level range.

2024 sign-and-trades

During the 2024 offseason, eight players have changed teams via sign-and-trade. Five of those players were what we’d call “traditional” sign-and-trade participants — DeMar DeRozan (Kings), Klay Thompson (Mavericks), Buddy Hield (Warriors), Kyle Anderson (Warriors), and Kris Dunn (Clippers) were each acquired by teams who didn’t otherwise have the ability to offer the salaries those players received via sign-and-trade.

DeRozan’s and Thompson’s deals exceeded the mid-level exception and were completed by teams without cap room available; Hield, Anderson, and Dunn all got contracts in the mid-level range from clubs who had already used their MLE on another player.

A sixth player, Jonas Valanciunas, could’ve been signed using the Wizards‘ mid-level exception, but the Pelicans agreed to sign-and-trade him to Washington because it was a win-win for the two teams — New Orleans received a heavily protected second-round pick and a trade exception in the deal, while the Wizards absorbed Valanciunas using a trade exception and preserved their full MLE. They used a portion of that mid-level to sign Saddiq Bey, while the remainder could prove useful later in 2024/25.

The final two sign-and-trade contract recipients of the 2024 offseason, Shake Milton and Cody Zeller, were used as salary-matching pieces in the Mikal Bridges and Dejounte Murray trades, respectively.

Because Milton and Zeller were essentially salary filler in those deals and the Nets and Hawks weren’t specifically targeting them, both players received salaries just large enough to meet the matching rules and received only one guaranteed season on their new three-year contracts.

The second apron tweak

While it has become relatively common knowledge among NBA fans that teams above the first tax apron can’t acquire a player via sign-and-trade, a new wrinkle was introduced in the 2023 CBA affecting teams above the second tax apron.

A team that sends out a player via sign-and-trade cannot take back salary – either simultaneously or non-simultaneously – in exchange for that outgoing player if that team is operating above the second tax apron. A team that takes back salary for a signed-and-traded player becomes hard-capped at the second apron for the rest of the season.

For example, when the Timberwolves – who are operating above the second apron in 2024/25 – signed-and-traded Anderson to Golden State, they were prohibited from taking back any salary using Anderson’s outgoing salary for matching purposes. Although the Wolves technically created a trade exception worth approximately $8.8MM (Anderson’s new salary) in that deal with the Warriors, they’ll be ineligible to use that exception as long as their team salary remains above the second apron.

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 versions of this post were published in 2013, 2019, and 2020.

Most salary cap workarounds, such as the mid-level exception, can be used every year — or at least every other year, as in the case of the bi-annual exception. However the disabled player exception is only available under certain circumstances. Like other salary cap exceptions though, the DPE allows a team to sign a player without using cap space.

If a player is seriously injured, his team can apply for the disabled player exception to replace him. In order for the exception to be granted, an NBA-designated physician must determine that the player is “substantially more likely than not” to be sidelined through at least June 15 of that league year.

If granted, the disabled player exception allows a club to sign a replacement player for 50% of the injured player’s salary or for the amount of the non-taxpayer’s mid-level exception, whichever is lesser.

For instance, if a team is granted a disabled player exception this season for a player earning $10MM, the exception would be worth $5MM. But if the injured player is earning $30MM, the DPE would be worth the equivalent of the mid-level exception ($12,822,000 in 2024/25).

A team must formally apply for a disabled player exception and it requires the approval of the NBA. If the league-designated physician determines the player will likely be fully recovered and available before June 15, the team’s request will be denied. That happened last season when the Knicks attempted to secure a disabled player exception for Mitchell Robinson‘s ankle injury. That turned out to be the right call by the league, given that Robinson returned to action in late March.

The cutoff to apply for a DPE each season is January 15. If a team has a player go down with a season-ending injury after that date, it cannot obtain a DPE to replace him. A team must also use the exception by March 10 of the current season or it will expire (this deadline can be pushed back to the next business day if March 10 lands on a weekend).

Unlike mid-level, bi-annual, or trade exceptions, the disabled player exception can only be used on a single player, rather than spread out across multiple players. However, a team can use it in a variety of ways — the DPE can be used to sign a free agent, to claim a player off waivers, or to acquire a player in a trade.

If a team uses its disabled player exception to take on salary in a trade, it can acquire a player making up to 100% of the DPE amount, plus $100K. For example, a $5,000,000 DPE could be used to trade for a player making $5,100,000.

A free agent signed using the DPE can only be offered a rest-of-season deal, while a player acquired via trade or waiver claim using the DPE must be in the final year of his contract. Essentially, the purpose of the exception is to give the team some flexibility to replace an injured player for the rest of the season, but not beyond the current season.

The team must have room on its roster to sign the replacement player — the disabled player exception doesn’t allow the club to carry an extra man beyond the usual limits.

In the event that a team is granted a disabled player exception, uses it to acquire a player, and then has its injured player return ahead of schedule (ie. before the end of the season), the team is allowed to carry both players.

However, if a team has an unused disabled player exception and then trades its injured player, the team would lose the exception. The same is true if the injured player returns to action before the DPE has expired or been used.

Most disabled player exceptions ultimately go unused. For instance, the Nuggets were granted a DPE due to DaRon Holmes‘ season-ending Achilles tear, but because he’s earning just $3,065,640 as a rookie, the exception is worth only $1,532,820, 50% of that amount. It doesn’t hurt for a team to have that tool as its disposal, but it will be difficult for Denver to do much with that.

More sizable disabled player exceptions can come in handy, most frequently in trades, where they can allow sometimes allow a team to generate a new trade exception with an outgoing contract rather than using it to match the incoming salary.

For example, after being granted a $12,405,000 DPE in the wake of Ja Morant‘s season-ending shoulder injury last season, the Grizzlies made a trade with Houston that sent out Steven Adams ($12.6MM) and brought back Victor Oladipo‘s expiring $9.45MM contract. Rather than using Adams’ outgoing salary as a salary-matching piece to acquire Oladipo, Memphis used its DPE to take on Oladipo’s deal, generating a new $12.6MM trade exception for Adams’ salary.

Notably, the Grizzlies had also been granted a separate $6.3MM disabled player exception for Adams after losing the big man to a season-ending knee injury, but they were forced to forfeit that DPE when they traded Adams away.

Note: This is a Hoops Rumors Glossary entry. Our glossary posts 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 versions of this post were published in 2012, 2017, and 2022.