Contractual Observations: Nets, Bulls, and a Trade Idea

Expand The... Lakers Trade?

One of my favorite parts of covering the NBA is trying to piece together the puzzle by looking at transactions and contracts across the league. The CBA is the language of the league, and every year teams try to pressure-test the ruleset and find advantages where they can. At the same time, agents are searching for ways to land their clients the best possible deal. All of this is governed by a collectively bargained document that lays out the ruleset. There is a push and pull to every decision—everything comes at a cost, even if that cost is just opportunity.

I wanted to use this space to talk about two interesting things I’ve seen this offseason across the league (interesting to me and probably only seven others), and one off-the-rails trade suggestion for the Pelicans.

1) Mutual Options Are In

Years ago, when the Pelicans were negotiating with restricted free agent Josh Hart, they came to an unconventional agreement. Hart and the Pelicans agreed to a three-year deal where the second year was fully non-guaranteed, and the third year had a player option. This created a “mutual option” mechanically, where in the third year, either side could decide to terminate the agreement. Since contract guarantees cannot increase in subsequent years, it meant that Hart’s third and final year with the Pelicans was fully non-guaranteed as well.

If your head isn’t spinning yet, here’s what that means for that third and final year: the team can decide they no longer want Hart’s contract and waive him, since they owe him no guaranteed money, or Hart can decide he no longer wants to be on the team and opt out. This creates a “mutual option” allowing both sides to walk away. The only scenario where that final year happens is if both sides decide they want to run it back. We have seen this structure replicated with James Harden, and most recently with Kristaps Porziņģis in Golden State. (Update, turns out the Porziņģis deal is just a player option but the small partial guarantee in the final year makes it an almost mutual option.)

What’s fascinating about this summer is the mutual opt-IN. The Brooklyn Nets have agreed to two such deals—with Keon Ellis and Mo Wagner. The Thunder have as well, with Isaiah Hartenstein. In these deals, the final years contain both a player option and a team option. This allows either side to unilaterally opt in, as opposed to opting out. Unlike the previously described Josh Hart structure, both sides would have to agree to walk away in the mutual opt-in scenario for the final year of the deal to not be in play.

We haven’t really seen a deal structure like this in 25 years. Do you remember Jerome Williams? Because I do not.

So the question is more so: why should the player or team agree to such a structure?

For the player—at least in Wagner’s and Ellis’s cases—these are fully guaranteed deals. They will be entitled to every cent, even if year one does not go well. For the team, there is a level of cost control that is established. If the player vastly outperforms their year one, the team can reap the benefits by triggering year two. It also allows both sides to meet back at the table after year one and decide if they want to renew their vows and create a new deal. Both sides have incentive to work out a longer-term deal, but neither side has the upper hand.

This is a far more collaborative structure than the Josh Hart/James Harden structure. Pretty nifty work by the Nets, Thunder, and the agents involved.

2) Why Did Chicago Extend Zach Collins?

When it was reported that Zach Collins signed for two years, $17 million, many assumed that Chicago was using the $9.3 million room mid-level exception available to cap-room teams. However, friend of the substack Keith Smith sharply pointed out that the correct mechanism was an extension. This would cause Chicago to burn through some cap space, leaving their functional room at that time at around $22 million.

On the surface, I thought this was super confusing and a misallocation of cap space. How could Chicago make such an obvious blunder? But as always, the devil is in the details. Collins’s deal is actually a 1+1 with a team option on the final year. Because this is functionally a one-year deal for the player, it carries an implicit no-trade clause if the Bulls used the room exception to complete it. Furthermore, there would be a recently signed trade restriction on Collins.

Since Collins was done as an extension, the Bulls can trade him immediately if they wish, and without player consent. The cost of those benefits was dipping into actual cap space, but Chicago has smartly structured their deals so there is no long-term money on the books. If they wish, the Bulls can open up serious cap space again next summer.

I thought this was a pretty cool example of real-time tradeoffs for certain decisions and a great example of how you conduct transactions being important. Chicago could have used the room exception on Collins and had the extra space to perhaps sign another marginal player. But clearly the Bulls decided the extra space was not worth the cost of trade restrictions or the implicit NTC. One quick note: the extension takes place in June, prior to the league calendar year flip.

Crazy Idea For The Pelicans

Remember a few summers ago when I was ranting about expanding the Memphis deal? Well, I am back, baby. We’re gonna look at another sign-and-trade and expand it bigger and better than before.

The trade in question is Walker Kessler to the Lakers. This is executed as a sign-and-trade into the Lakers’ cap space. What if Utah was a Trey Murphy team? They certainly have the draft picks for Murphy. They don’t exactly have a true wing of Murphy’s caliber, and Murphy also makes less than the alleged walk-away number the Jazz had for Kessler.

I have no clue if Utah actually wants Murphy, and frankly, that isn’t the point of this exercise. But in a hypothetical world where they did, this would be a great opportunity for the Pelicans to maximize some flexibility. Let’s game this out.

Because Utah is operating as an “above the cap” team, Kessler’s contract will be subject to base-year compensation. Kessler can only bring back about $24.21 million in salary matching by himself. This is not quite enough to match Trey Murphy’s $27 million. No matter—the Jazz can easily bridge the gap by putting Kyle Filipowski in the deal, or another small contract. This small contract would go into one of the Pelicans’ existing exceptions, and the Pelicans would in turn create a $27 million Trey Murphy–sized trade exception.

Do you see where I am going with this? Are you experiencing déjà vu yet with me trying to create exceptions upon exceptions? If you didn’t have the pleasure of experiencing that summer with me, I am trying to say the Pelicans will have $27 million of newfound flexibility they can now utilize in the trade market. Want to absorb Myles Turner and not send out any picks? Done. Want to take on Wendell Carter Jr. now because the Magic are way over the first apron? Done.

Imagine a Trey Murphy return that is Filipowski, Carter, with multiple picks and swaps. All of a sudden, this now meets the Pelicans’ criteria of winning now and collecting assets.

Obviously, there would be many small details to sweat, like a team asking for Missi, or someone wanting more seconds. Whatever. The larger concept—using the Utah–Los Angeles deal as a pathway to players you want—is the meat and potatoes. Have fun with this, Pelicans fans.