Explaining CAP holds, CBA, and how trades work

[heathmalc]

I just finished reading part of a thread at a well known Cavaliers Forum... that used to have fans that knew what they were talking about. However, lately it seems that more than half of them have absolutely no clue as to how cap-holds, trades, etc work - among other things.

In light of this, I decided to start this thread so that I can correct some of the obvious misunderstandings that some fans may have when it comes to what (exactly) the Cavaliers can, and cannot do, and when.

A Cap hold:- Teams have a cap-hold on players that are free-agents, 1st round draft picks (scale of pick position), and player with offer-sheets.

* For the free-agent: His cap-hold is 105% of whatever his previous year's salary was. The reasoning: a free agent's maximum salary in the first year of a new contract is never less than 105% of his salary in the last year of his previous contract. The only exception to this rule is when the player already has an offer-sheet, IE: LeBron James has a player option (which is a pre-signed offer sheet), therefore, his cap hold is $17.2M (The salary the offer-sheet calls for). In LeBron's case, if he doesn't accept the option by July 31st, then the offer expires, and he becomes a regular free-agent, and the Cavaliers' cap-hold would go down to the 105% mark of $16.5M. Another offer-sheet would be a restricted free-agent who is given a qualifying offer by his team. The cap-hold would be whatever the QO is. A team that makes an offer to a RFA, would also have a cap hold placed on them for up to 7 days, for the amount they offered the RFA. 1st round draft picks have a scale cap-hold, depending on where they are chosen in the draft. 2nd round picks DO NOT have cap-holds, because their contracts are not guaranteed unless the team decides to guarantee it.
Other Cap-hold notes: Not all free-agents will cause a team to have a cap-hold placed on them. For instance: A player who is signed to a 3 year contract, with only the 1st or 1st & 2nd yrs guaranteed, will not have a hold if the team doesn't exercise the option. PLayers under a 1 year contract will not have the hold. Unless the player has acquired bird-rights of some form, and the team has always exercised all of it's options, is a hold placed on that player.

Also: Teams that have less that 13 players under contract for the following season, will have a hold placed on each player they are short of the minimum # of players. For example... if the minimum salary is 1 million dollars, and the Cavs have no draft picks, and only have 12 players under contract (or potential contract) for the following season, then a 1Million dollar hold will be placed on the team's cap number for the 13th player. New York has 4 players under contract next season. The total amount those 4 players will make is about 6 million. There will be a cap hold placed on the Knicks for the other 9 spots, for the minimum salary. So if the minimum is 1M... then the cap hold would be 9 million.

Trades: Rookies, who are drafted, cannot be traded for 30 days. A draft pick (any pick), can be traded over and over, as long as it is before the draft. Players who are traded anytime after the season regular season, cannot be traded for 90 days, or December 15th - whichever is LONGER.

Other trade notes: As long as a team is no longer in the playoffs, and the regular season has ended, then they may make trades. Teams that have cap-space can make uneven trades. For instance: New York could make a trade with the Cavaliers for LeBron James, Mo Williams, and Antawn Jamison... TODAY! LeBron would STILL become a free-agent, and New York would have a 17.2M cap hold because of him. However, the Cavaliers would no longer own LeBron's Bird-Rights; New York would. So if LeBron signed with the Cavaliers, the most he could make next year would be 16.58 million (105% of his previous year's salary).
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For those of you that think the Cavaliers will have cap space this off-season, because Shaq is expiring at the end of the month along with Zydrunas & Jawad... you are wrong. The Cavaliers have 67 million committed to next year's salary (this includes LeBron's cap-hold). That is projected to be approximately 12 million over the salary cap. So, even if the Cavs traded Jamison to another team for a player that is expiring at the end of the month, the Cavaliers would still only have 1 million dollars to spend... which, in-essence is none at all, because they can sign a player to a minimum contract even if they are over the cap. IF the Cavaliers lose LeBron to free-agency... they will have approximately 5.2 million in cap space to sign another player... that is about the same amount they'd have if LeBron re-signed, because they'd have the mid-level exception, which is approximately the same amount. A team that is under the cap (regardless of how much they are under) are NOT entitled to the mid-level exception.
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Rumors & Speculation: There are rumors that the Cavaliers are trying to trade for a big-name player, and a lottery-pick. Some of you have begun speculation based on Brian Windhorst's comments today. One of the wilder speculative posts that I read, had the Cavaliers trading Mo Williams to Sacramento for their #6 pick. For some reason, the poster believed the Cavaliers would have about 8 million to sign a free-agent. That's not even close to true. First of all, the draft pick itself would place a 3 million (approx.) hold on our cap. But even if it didn't, the Cavs would still be about 3-4 million over the cap. If the Cavs could hypothetically trade Jamison & Mo to Sacramento for the #5 pick, then the cavaliers would have a little cap room: Current - $67M (12 million over cap). Subtract Mo (9million) and Jamison(13million) from that cap number, and that equals 45 million. add the draft pick's cap hold (3-4 million), and that makes the Cavaliers cap number 48-49 million. The projected salary cap number is supposed to be about 55.5 million. That means the Cavs would have 6.5 - 7.5 million to spend on a free-agent if they got rid of both Mo & Jamison. That isn't very much money for a good player... unless they got real lucky. Now... if the Cavs lost LeBron, AND got rid of Mo & Jamison for a draft pick... then they'd have approximately 24-25 million to spend.


Hope this helped some of you.

[Three34]

His cap-hold is 105% of whatever his previous year's salary was.

Free agent cap holds vary greatly, depending on factors such as years of experience, previous salary and what kind of Bird rights they qualify for. It is not a universal 105% for every player; in fact, it's only ever that for people whose maximum salary otherwise exceeds the maximum salary for their relative years of service.

The only exception to this rule is when the player already has an offer-sheet, IE: LeBron James has a player option (which is a pre-signed offer sheet), therefore, his cap hold is $17.2M (The salary the offer-sheet calls for). In LeBron's case, if he doesn't accept the option by July 31st, then the offer expires, and he becomes a regular free-agent, and the Cavaliers' cap-hold would go down to the 105% mark of $16.5M.

Sorry to be that guy, but this is all completely incorrect. You've confused your terms here. Player options and offer sheets are not related. Offer sheets are something completely different - an offer sheet is a contract that a restricted free agent signs with a team other than his own. The only player to whom this might apply for the Cavaliers this offseason is Jawad Williams.

A cap hold is a charge issued to all free agents on your cap, purposely designed so that a team can't just sign other team's free agents before signing their own. A player option is a year of salary on a pre-existing contract. An offer sheet is a contract.

Another offer-sheet would be a restricted free-agent who is given a qualifying offer by his team. The cap-hold would be whatever the QO is. A team that makes an offer to a RFA, would also have a cap hold placed on them for up to 7 days, for the amount they offered the RFA. 1st round draft picks have a scale cap-hold, depending on where they are chosen in the draft. 2nd round picks DO NOT have cap-holds, because their contracts are not guaranteed unless the team decides to guarantee it.

This is all correct, although the reason second rounders don't have cap holds is because they don't have set contracts, unlike the rookie scale for the first rounders. You can give a second rounder whatever the hell you want, if they'll take it.

Not all free-agents will cause a team to have a cap-hold placed on them. For instance: A player who is signed to a 3 year contract, with only the 1st or 1st & 2nd yrs guaranteed, will not have a hold if the team doesn't exercise the option

This is incorrect too. Players whose options are declined, by either the player or the team, continue to have cap holds. As is the case with all cap holds, they will only disappear if:

a) that player formally files retirement papers with the league (which almost no one does until they are pension eligible)

b) they are renounced (which doesn't happen unless teams can have cap space; this is why you still have cap holds on Wally Szczerbiak and Lorenzen Wright)

c) they sign a new NBA contract.

If you turn down Leon Powe's TO this summer, he won't have a contract, but he'll still have a cap hold.

PLayers under a 1 year contract will not have the hold.

Every free agent a team has, i.e. anyone without a contract for next year, will have a cap hold. It doesn't matter how long their previous contract was. This is because.....

Unless the player has acquired bird-rights of some form,

.......Every free agent has some form of the Larry Bird exception applying to them. People that have played for only one season without changing teams as a free agent are known as "non-qualifying veteran free agents"; colloquially, they are said to have "non-Bird rights". People that have played for two seasons without changing teams as a free agent are known as "early qualifying veteran free agents" ("early Bird rights"). And people that have played for three or more seasons without changing teams as a free agent are known as "qualifying veteran free agents" ("full Bird rights").

Every free agent fits under one of those three things. In all three cases, that player will have a cap hold. Indeed, as mentioned at the start, whichever one of the three they are goes a long way to determining the size of their cap hold.

Also: Teams that have less that 13 players under contract for the following season, will have a hold placed on each player they are short of the minimum # of players. For example... if the minimum salary is 1 million dollars, and the Cavs have no draft picks, and only have 12 players under contract (or potential contract) for the following season, then a 1Million dollar hold will be placed on the team's cap number for the 13th player. New York has 4 players under contract next season. The total amount those 4 players will make is about 6 million. There will be a cap hold placed on the Knicks for the other 9 spots, for the minimum salary. So if the minimum is 1M... then the cap hold would be 9 million.

The principle of what you say here is right, but a few technical details;

a) the roster spot charge is equal to the value of the rookie minumum; next year, that will be $473,604.

b) roster spot charges apply up to and including the 12th spot, not the 13th.

Rookies, who are drafted, cannot be traded for 30 days.

Rookies can be traded instantly if you do it before you sign them. This is how draft night trades happen. Only once you sign them does the 30 day waiting period start.

. For instance: New York could make a trade with the Cavaliers for LeBron James, Mo Williams, and Antawn Jamison... TODAY!

No they couldn't. They could trade for Mo and Jamison, but not LeBron. As you said, you can make trades againa s soon as your season ends, but, in the period between the end of a team's season and the start of the July moratorium (i.e. the start of the next season), you can't trade for people who are going to become free agents, or who could become free agents with an option.

So if LeBron signed with the Cavaliers, the most he could make next year would be 16.58 million (105% of his previous year's salary).

If/when he opts out, that's the most he can make anyway. LeBron's maximum next year will start at $16,568,908, which is 105% of his current salary, regardless of which team he signs with.

A team that is under the cap (regardless of how much they are under) are NOT entitled to the mid-level exception.

Not quite. If for example a team would be $6 million under the cap without exceptions, but have $7.5 million in exceptions, then they are regarded as over the cap and get the exceptions rather than the cap space.

[heathmalc]

You have quite a few things wrong... I don't want to copy it all again from the CBA, or make a 3 page post telling you why the stuff I said was correct, but I'll just say that it was.... not that it really matters, since none of us are GMs anyway.

[Three34]

No, dude, I really don't. I don't want to stand here and have to prove my credentials in an e-penis showdown, because then we're all going to look like douchebags with no genitals. But it's not wrong. If you have queries or questions about what I wrote, then let's by all means talk them through.

[old skool]

Wow.

The original post started out with a mistake - that all free gent cap holds are 105% of the previous salary. A most basic perusal of the FAQ shows that to be wrong. Go back and re-read. Likewise for the miss-mash of options and offer sheets and qualifying offers. There is almost too much wrong to correct. I would just re-read the FAQ.

oLd sKool

[heathmalc]

Wow.

The original post started out with a mistake - that all free gent cap holds are 105% of the previous salary. A most basic perusal of the FAQ shows that to be wrong. Go back and re-read. Likewise for the miss-mash of options and offer sheets and qualifying offers. There is almost too much wrong to correct. I would just re-read the FAQ.

oLd sKool

I have only seen the FAQ about 5-6 times... to use for a link for someone who doesn't have the actual CBA. The problem with the FAQ is that it is not fully updated as much as Coon lets on. Go read his chat from last month, and he'll tell you the same.

If you want a copy of the CBA and the "current" ammendments, goto the NBAPA site, where you can download it section by section.

It is updated weekly BTW.

SHAM: No E-penis showing is necessary, as I wasn't intending on making an argument out of this. The only purpose was to correct a couple misleading things said on ESPN and repeated across the forum as fact.

I did not always show things to the exact dollar, as that makes a post to complicated & long. The purpose was to give a quick laymen view of why certain things could or couldn't happen. For example... The 105% cap hold. It is easier to say all free-agents, have 105% hold than it is to go through every scenario that there is... that alone would make my post twice as long as it was.

That being said... you were wrong about the following:

If/when he opts out, that's the most he can make anyway. LeBron's maximum next year will start at $16,568,908, which is 105% of his current salary, regardless of which team he signs with.

#1 LeBron cannot "opt out." He can only "Opt in."
(A player option is not part of a contract until it has been exercised.) The only way A player can "opt out" is if they have an ETO. LeBron doesn't. LeBron has fulfilled his entire contract with Cleveland.

#2 LeBron doesn't need to accept the option year to keep his Bird-rights, which is what you implied when you said the most he could earn from the Cavaliers is 105% of last season's salary. Because LeBron still has full Bird rights, he is entitled to 110.5% of last season's salary... which is 17.1 million.
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I was wrong about the trade thing though... LeBron couldn't be traded unless he did exercise his option; which would be pointless for the Cavs anyway. I don't even know where I was going with that.

[Three34]

It is easier to say all free-agents, have 105% hold than it is to go through every scenario that there is...

It's also grossly inaccurate to say that.

#1 LeBron cannot "opt out." He can only "Opt in."
(A player option is not part of a contract until it has been exercised.) The only way A player can "opt out" is if they have an ETO. LeBron doesn't. LeBron has fulfilled his entire contract with Cleveland.

So when you said I was wrong a lot, what you actually meant was that I had one terribly minor possibly confusing terminology moment. Alright. By the way, this doesn't matter.

Because LeBron still has full Bird rights, he is entitled to 110.5% of last season's salary... which is 17.1 million.

No, he is not. If he opts out, he does not have a contract. If he does not have a contract, the most he can sign for is the maximum. And his maximum will be the greatest of either:

a) 30% of a modified salary cap that uses 48.04% of projected BRI rather than the usual 51%,
b) $11 million, or
c) 105% of his previous salary.

(a) was worth $16,224,600 last season, and will be going down along with the cap. (b) is worth $11,000,000, obviously. And (c) will be for $16,568,908, which is 105% of his current salary. This will be his maximum starting salary next season, no matter who he signs with.

This includes Cleveland.

Bird rights do not change his maximum salary.

[heathmalc]

Because LeBron still has full Bird rights, he is entitled to 110.5% of last season's salary... which is 17.1 million.

No, he is not. If he opts out, he does not have a contract. If he does not have a contract, the most he can sign for is the maximum. And his maximum will be the greatest of either:

a) 30% of a modified salary cap that uses 48.04% of projected BRI rather than the usual 51%,
b) $11 million, or
c) 105% of his previous salary.

(a) was worth $16,224,600 last season, and will be going down along with the cap. (b) is worth $11,000,000, obviously. And (c) will be for $16,568,908, which is 105% of his current salary. This will be his maximum starting salary next season, no matter who he signs with.

This includes Cleveland.

Bird rights do not change his maximum salary.

Ah, yes, you are right... Mostly. LeBron can become a free-agent, and still get the 17.1M I was talking about... but not if he signs a free-agent contract (even with the Cavs). He can get the 17.1M by exercising the option, then signing an extension ( this can be done after he becomes a free-agent, because the option does not expire (according to his contract) until Aug 1st, 2010.

However, it would be more profitable (from a salary standpoint) if he terminated the option (may have already done this), and signs an extension to his current contract, before july 1st. He would do best by signing a 3 year extension, with a 4th year option again. This is because his salary in yr 3 would be 20.8M. He would be a 10 year vet, and would be able to get a contract with up to 35% of the BRI. If things go well, he may be able to increase his salary by a few million a year.

BTW... that was the purpose of his first 3yr extension... at the end of which is the 7th season (now) and he is entitled to 30% for the first time. Had the economy gone differently, it would have made more sense for him to become a free-agent, and re-sign with the Cavs. Had we continued upon the model, he'd have been able to sign for a 1st starting salary of approximately 18.9 million.

This is why I believe he will sign the extension... every move he has made has always been due to what would maximize his salary... not because he wanted to have a summit with Wade! That is merely a ploy.

[Three34]

LeBron can become a free-agent, and still get the 17.1M I was talking about... but not if he signs a free-agent contract (even with the Cavs). He can get the 17.1M by exercising the option, then signing an extension ( this can be done after he becomes a free-agent, because the option does not expire (according to his contract) until Aug 1st, 2010.

Options must be decided upon on or before June 30th. For that is the last day of the season. Do you really think LeBron has until August 1st to decide whether to exercise his option? If so, show me the piece of the CBA that you (mis)read to arrive at that conclusion. Because here's the bit that tells me options have to be exercised on or before June 30th:

http://www.nbpa.org/sites/default/files ... %20XII.pdf

Any Option must be exercised prior to the July 1st immediately prior to the Season covered by the Option

Section 4, sentence 2.

I can't even figure out where you get these conclusions you get from. You must be seriously confused by the CBA's language. And for that reason I advise you to swallow your pride and use Larry's FAQ.

The only purpose was to correct a couple misleading things said on ESPN and repeated across the forum as fact.

But this is the complete opposite of what you've done. You've forwarded even more misinformation, incuding some of your own invention, and invoked the "I read the actual CBA unliek you" defense. Just not neessary, dude. I was trying to help you, just like you were trying to help others.

Have the humility to say you got it wrong. You don't need to fight to explain it all away like this.

I like you, heath. You post reams of inaccurate information, get corrected, plump for the "you're really wrong but I'm not telling you how" route, get further corrected, and then you still try to tell me things you think I don't already know and act as if you were *nearly* right all along. Which you weren't. Most of your initial post was wrong, and only when we break it down case by case have you hinted at having the humility to admit it. There's nothing wrong with being misinformed. Just don't be so snippy about it, like you were.

[heathmalc]

There's nothing wrong with being misinformed. Just don't be so snippy about it, like you were.

It was not being "misinformed" and I wasn't "snippy."

What I did was went back to see where I was wrong. Then I said I was, when I was. Nothing "snippy" about it.

I have DL'd the CBA, and I have read it quite a few times. However, I am not paid to go over it every time I talk about it, so I go from memory.

I also don't see what I wrote as being "reams of inaccurate" as you hinted.

Never-the-less, I will end this now because I don't want to waste time arguing about minute details of a bargaining agreement, when it's only purpose (the thread) has gone from trying to help, to a back-n-forth banter about who is "snippy" and who is right or wrong. The CBA will only be valid for one more year, and thankfully it isn't my job to actually try to be right about it everytime I open my mouth (or in this case, type). All I really care about is whether the Cavs can keep winning.

[Three34]

Good talk, heath.

[greenwing]

Trying to argue with a cap guru like Sham? Haha, that's got to be extremely tough to do. Props for trying, though.

[MC dhaos]

pwnt

[bcortell]

I can't believe you guys actually argued with Heath over this. You should have just said he was wrong and moved on.

Maybe I need to bring back the "No Heath" sig back. Hmm...

[Mezotarkus]

Heath, a few pointers:

Don't make a post called "Explaining CAP holds, CBA and how trades work" when you do not yourself understand those topics and have not spent the time to understand them.
Don't dismiss points as incorrect when you clearly have no basis to do so.
Don't be dismissive of someone like Sham who spends a lot of time on these boards and on his own website providing information to fans like you and myself.