The Waive And Stretch: The Best Tools To Manipulate Player Cap Hits In The Apron Era, The Steven Adams Extension, And The Magic Make A Splash Trade
Welcome back to another edition of The Waive and Stretch Newsletter. A quick shameless plug to note that I am looking to work in basketball in any capacity and would love to connect with anyone in the industry or trying to break in. Please feel free to share this with anyone who you think might find it interesting. Let's get into it!
What Caught My Attention This Week
The Best Ways To Manipulate The Salary Cap
In this apron era where every single dollar of apron space is pivotal, we are starting to see just how imperative it is to have smart salary cap management. It is important for teams to be aware of every possible tool available to them in the CBA toolbox so that they can build and sustain a competitive roster now and into the future. This new CBA is going to require teams to be very conscious of their future salary cap when not only trying to decide how much to pay a player in a contract, but how to structure that contract over the life of the deal. To me, one of the biggest drivers of smart salary cap management is when teams try to create the biggest gap in a player’s value and their cap hit. Yes, the easiest way to do that is to just sign players to under-market contracts, but that isn’t something that teams can just do on a regular basis. I wanted to take a look at some of the different contractual tools available to teams that can make a difference in how teams build out their rosters and manipulate player cap hits and the salary cap in general, and real life examples of their impact.
Renegotiation and Extension
The renegotiation and extension tool gives teams the ability to reduce or increase a player’s year over year cap hit by 40% in the first year after the renegotiated year. This the biggest year over year change in cap hit available in the same transaction and really gives teams the ability to distort a contract’s cap hits vs total compensation. One of the most under-discussed but hugely important transactions for example, in 2023 the Indiana Pacers re-negotiated and extended Myles Turner to the tune of 2 years and $60 million in new money. $17 million of that was tacked onto his contract that year, and the remaining $43 million was spread across the two extension years, Instead of $30 million cap hits across the cap years if there was no renegotiation. Are the Pacers able to pull the Siakam trade had they not done this? They certainly would not have the same roster they do today had they not re-negotiated and extended. Sometimes the best use of cap space is just simply pulling forward player earnings to buy lower cap hits down the road.
Team Options
I’ve written about this numerous times, but team options provide so much flexibility for roster building. It gives a team a pivot point where they can assess their current cap situation and make a decision on a player’s team option/next contract from there. It also gives the team the leverage on the decision as opposed to a player option. If a player has a team option where it is clearly at a higher number than their market value, they can negotiate the next contract in total and manipulate the cap hits from there, either by opting into the option and extending at much lower cap hits, or opting out and smoothing out the cap hits at a lower number in the first year (See: Houston/FVV this summer). And vice versa for a player who has a team option at a much lower number than their market value, where a team can opt out and get a player on a below market deal because of how much more money they are making in that first year, very common with 2nd rounders (See: New Orleans/Herb Jones, OKC/Aaron Wiggins/Lu Dort/Isaiah Joe). This summer, the Sacramento Kings are in that very same situation with Keon Ellis. We will see if they use the opportunity to pull forward player earnings to buy lower cap hits down the road.
Declining Contracts Year Over Year
By and large, common practice in NBA contracts is to structure contracts so that the lowest cap hit is in year one, followed by the maximum allowable raises year over year, whether that be 5% or 8%. Usually this is done out of necessity to preserve tax/apron space and kicking the can down the road, or it is just by the nature of maximum contracts. Sometimes, however, teams have had the foresight to decline a player’s deal by the maximum allowable amount year over year. Take the Knicks and Mitchell Robinson for example. They started him out at the highest amount they could on his 4/$60 million deal, giving them an additional $1.2 million in “space” this year as opposed to had they done max raises. It may not seem like much, but think about the tight maneuvering the Knicks did this year to end up only within ~$50,000 of the second apron hard cap. Because they pulled earnings forward, they bought lower cap hits down the road and it paid dividends for them.
Rookie Scale Contract Contributors
Before having the ability to structure a player contract with some of the above tools, you first have to identify and acquire said player. Enter the draft. One of the benefits of the draft is that drafted players’ come into the League on fixed, rookie-scale contracts. They don’t get valued by the “marketplace” of teams, aka the ability to negotiate a contract with multiple different suitors, they are simply assigned a contract based on when they are drafted. And so, you can get max-level performers on relatively small-dollar contracts, producing huge surpluses of value for teams (See: Victor Wembanyama, Jalen Williams, Chet Holmgren, Paolo Banchero, Evan Mobley etc). This is what I try to measure with my Estimated Player Values (EPV), essentially what would this player’s value be on the open market based on their performance and what similar players have gotten on veteran contracts. The table below shows just how much surplus value teams got out of their rookie-scale players for the 2024-2025 season. You can see the Thunder clearly in the lead, and that makes sense with guys like the previously mentioned Williams and Holmgren, along with Cason Wallace.
By and large, these are all things that teams can do on the margins of roster building. You still need to acquire top level talent to meaningfully compete for championships in this league. A lot of times the opportunity to use these tools only come when a team is not competitive or in a transitional period. But nailing the margins when you were in transitional periods can make all the difference when you are trying to compete for championships. Look at the two teams in the Finals this year. Is Indiana in the position they are in had they not renegotiated and extended Myles Turner? Are the Thunder as set up for the future if they hadn’t turned down the team options of Aaron Wiggins, Isaiah Joe, and Lu Dort and gotten below market, multi-year deals? What if they had cashed in their rookie-scale talent for a big money superstar? Every dollar counts in the apron era, and teams need to take full advantage of the tools available to them in their roster-building toolset.
Houston Rockets, Steven Adams Agree To Extension
The Rockets have extended Steven Adams on a 3 year, $39 million fully guaranteed deal with no options. Its a descending structure, with the yearly cap hits below.
2025-2026: $14,130,434 (9.1%)
2026-2027: $13,000,000 (7.6%)
2027-2028: $11,869,566 (6.3%)
Think this is a pretty easy deal for both parties. EPV pegged his value at about $46 million over 3 years. Houston still maintains their flexibility this summer with the FVV contract. Adams bags another 3 more guaranteed years through age 34, and cannot be traded for 6 months due to the contract declining by 8% annually. One thing to note, I don’t think the Rockets would have max descended this contract if they were planning on sweating a hard cap on either apron this year. Just something to note as they continue to be in the thick of trade rumors.
The Magic Make Their Win-Now Trade
The Orlando Magic and Memphis Grizzlies agreed on a deal that sends Desmond Bane to Orlando. Full details:
Orlando Magic Receive: Desmond Bane
Memphis Grizzlies Receive: Kentavious Caldwell-Pope, Cole Anthony, 16th Pick, ORL 2026 1st, ORL 2028 1st, 2029 Swap (Top 2 Protected), ORL 2030 1sts
This was a big splash for the Magic. As I noted previously, Jeff Weltman hinted pretty heavily that a deal like this was coming this summer. Again, his quote from his end of season availability.
I think we’re ready to kind of walk into the next phase of our team. The next stage of our team and its more of a win now philosophy, a win now approach, I think. And so with that, I think maybe to be less protective of picks and future assets to look at what we can turn into winning now.
They brought in some much needed shooting without giving up too much talent, but at a cost of probably overcompensating with draft capital. They also had to maneuver some tricky CBA restrictions. Due to Article VII, Section 2(e)(3) of the CBA (screenshot below), the Magic had to turn down the team options of Gary Harris and Cory Joseph to stay under the second apron applicable to them currently until the first day of the new salary cap year.
For Memphis, this gives them a surplus of first round draft capital and gives them a little bit of cap flexibility going forward. It also speaks to what Zach Kleiman discussed in his end of season presser. Again, his quote:
We need to have a very open mind from a team-building standpoint on what we can do to put this group in the best position that we can going forward, but it doesn’t matter, it hasn’t been good enough… I don’t think we can look back at this series and this season and say, “oh we’re close”. No, we’re not. There’s a lot of work to be done. I need to be open minded on multiple respects.
I’ll be very interested to see the direction the Grizzlies go this summer. Do they still prioritize renegotiating and extending Jaren Jackson Jr? Do they turn that draft capital around and bring and try to bring in a star level player? Is this a stealth one-year tank considering the strength of the West? Or is there more trades coming down the pipe turning it into a full on re-build? Time will tell.