Chris Sheridan of Sheridan Hoops wrote:
Regarding Dwight Howard and Chris Paul and their respective trade desires, it is worth explaining in dollars and sense why they’d prefer to be dealt sooner rather than later.
In order for them to get the most possible money, they’ll need to finagle a way into landing in their desired destinations prior to the trade deadline.
And despite all the hand-wringing over the owners’ capitulation in negotiations over the so-called Carmelo Anthony rule, neither of those guys is likely to do an extend-and-trade.
From the NBA memo sent out to general managers regarding terms of the new collective bargaining agreement:
_ Extension-and-trades permitted, except maximum length of such contract is 3 years (e.g. 2 new years if player during last year of his old contract and max annual increases are 4.5 percent. If a player signs a contract extension for a longer period or higher amount that would have been permitted for an extension-and-trade, then the team is prohibited from trading the player for a period of six months following the date of the extension. If a team acquired a player in a trade, then, for a period of six months following the date of the trade, the team is prohibited from signing the player to a contract extension for a longer period or higher amount than would have been permitted for an extension-and-trade.
Let’s look at this in a little more detail:
Both Howard and Paul are under contract for two more years but have opt-outs that would allow them to become free agents July 1, 2012.
Any extensions they signed between now and June 30, 2012, could only take them through the 2013-14 season because of the above-noted 3-year rule (the upcoming 2011-12 season counts as one year, the 2012-13 option years on both players’ contracts count as Year 2, and the extensions they would receive as part of the extend-and-trade deals would count as Year 3).
If the Magic decided to fast-track a Howard trade (as Marc Stein reports they are strongly considering), Orlando could only give him a one-year extension (and the maximum raise would be 4.5 percent off his 2012-13 salary) in an extend-and-trade deal. So Howard, who is due to make $19.54 million in 2012-13 if he does NOT opt out, could sign an extension that would pay him $20.415 million for the 2013-14 season, after which he would be a free agent.
He would be much better served to opt out of his contract and sign a five-year deal with 7.5 percent annual raises with the team that acquired him for a total of $110.8 million over 5 years.
The trick is getting to his desired destination. If he was traded somewhere he wasn’t happy, he could leave as an unrestricted free agent but would be limited to a 4-year deal with 4.5 percent annual raises.
if Howard plays out the season with the Magic and opts out, the best deal he could get in a sign-and-trade or an outright unrestricted free agency signing would be $80.5 million over four years. (A team would need $18.9 million in cap space to make him a max offer.)
So, to summarize, here are the options and the financial implications for each player.
_ Plays the entire season in Orlando, opts out and ends up elsewhere (either by signing as a free agent or through a sign-and-trade): $80.5 million for 4 years.
_ Gets traded in February, opts out, then re-signs with the team that acquired him: $110.8 million for 5 years.