In the National Basketball Association (NBA) a trade deal is in place which is legally permitted by the Collective Bargaining Agreement (CBA) in which a certain team or business has the option to sign an unrestricted free agent or trades the individual to another team. Each season, teams have the option to sell or trade players, but must be in adherence with the CBA.
There are many benefits to this type of trading for those in the industry, as it helps keep profits high from assets (player) that would be missed out on if the player had the ambition of becoming a free agent. There is, however, a cap on the total amount that can be spent purchasing players; but as expected, this figure does change depending on the income of the league from the season that has passed. The sign and trade deal offers a much more respectable contract to the player under the standard regulations of the league.
Teams have the freedom to carry out trading of players up until the 17th Thursday of the season, which is the final deadline to be adhered to. If teams don’t make the playoffs, they are given the go-ahead to resume trading once the final game of the season has come to an end.
However, no trade is complete without a meeting with the league, in which all of the information about the player including the likes of criminal background etc is discussed.
As with any type of investment, there are rules that need to be adhered to for NBA trade deals:
For free agents that have been in the industry for many years, a trade deal is permitted in the following instances:
- The player needs to be signed within the trade after finishing the previous season in his former team
- The contrast is signed before the first day of the new season
- The contract spans three to four seasons
- The player is covered with 100% compensation protection within the first 12 months
Instead of trading players, teams can also choose to hand over players for cash; which is similar to any other type of investment; in the hope they can make a profit than what they had purchased them for initially. This is essentially how teams earn revenue. The amount of money that teams can receive is met by a salary cap, which rises and declines each season.
This type of trade deal could be compared to stocks and CFD trading, as this is the act of buying and selling assets in an attempt to make a profit on the sale price. However, one of the benefits of CFD is that you have the option to choose your trade size based on the amount of cash you wish to invest and you have the flexibility to choose your market.
We hope this guide has given you a brief insight into how NBA trading works and the negotiating agreement in place.