From ESPN Insider - Trade Rules of the NBA

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By Chad Ford
ESPN Insider

Every year around the trade deadline, wild trade rumors surface that can't possibly work under the rules of the collective bargaining agreement.

Want to avoid being duped?

Here are five essential rules to help sort out the types of trades that can and can't happen:

Rule 1: All contracts traded must be within 15 percent and $100,000 of each other.
This is the most basic trade rule. It means teams can't swap a $10 million player for a $2 million player. If a team wants to trade one player or a group of players, it has to abide by this rule – with a few exceptions.

The first exception is for teams under the cap. A team that is $10 million under the cap could obtain a $10 million player without sending back anything in return.

The second exception is for teams that own trade exceptions. Referring to our last example, if a team that was over the cap sent a $10 million player to a team under the cap (the Nets did exactly that when they traded Kerry Kittles to the Clippers last summer), the team sending the player receives a trade exception from the league in the amount of the traded player's salary minus any contracts it might have received in return.

In the Nets' example, they didn't get any contracts in return, creating a $10 million trade exception. The Nets used it last week to acquire Cliff Robinson. Even though the Nets were way over the cap, they were able to acquire a player who made $5.3 million without meeting the 15 percent, $100K rule. As a result of the trade, the Warriors created their own trade exception in the amount of Robinson's salary. The Nets' exception was reduced to $4.9 million.

Cash (up to $3 million), draft picks and the draft rights to players who have been selected but not signed don't count toward the 15 percent, $100K rule when included in a trade.

Rule 2: Some contracts are more tradeable than others.
There are two types of contracts that can be almost impossible to trade.

The first is called a "base-year contract" or (BYC). The basic rule is pretty simple. If a team is over the cap and re-signs a lower-priced player to a big contract (a raise greater than 20 percent), his salary receives base-year status for one year. During that one year, the team that signed him can take back only half of the player's actual salary in a trade (or his previous year's salary, whichever is greater).

For example, Darius Miles made $4.1 million last season. Over the summer, he signed a six-year contract in free agency with a starting salary of $6.75 million. That's more than a 20 percent raise, and the Blazers were over the cap. Thus, Miles' contract earned base-year status.

If the Blazers wanted to trade Miles straight up, they could take back only $4.1 million in return (in this case, Miles' salary last season was higher than 50 percent of this year's salary). Because of the 15 percent, $100K rule, trading Miles becomes almost impossible, because the Blazers are really sending out double what they are able to take back.

There are ways around the rule, however. If the Blazers could package Miles with several high-priced players, they might be able to get the salaries they get in return to fit into the 15 percent, 100K rule slot. But it isn't easy.

If a team does trade a base-year player or falls under the salary cap, the base-year status goes away.

For our list of each team's base-year players, see our team trade assets page.

The second troublesome contract is nicknamed a "poison-pill contract." This contract is reserved for players in their rookie contract who sign long-term extensions in the fall. Because extensions don't kick in until July 1 of the next year, a special rule applies.

If a team tries to trade a player still in his rookie contract with a pending extension between the date his extension is signed and the date it takes effect, the poison-pill provision kicks in. The team that sends out the contract uses his current salary to figure his value. The team that receives his contract must average his current salary with the salaries he's paid in each year of the extension.

For example, Andrei Kirilenko signed a six-year, $86 million contract extension last summer. If the Jazz wanted to trade Kirilenko, they would use his current salary ($1.7 million) to figure his trade value. The value of Kirilenko's contract to the team acquiring him, however, would be $12.5 million. Unless the team trading for Kirilenko was $11 million under the cap, it wouldn't be able to swallow the difference.

Poison-pill contracts are almost impossible to trade, especially when a low-salaried player such as Kirilenko signs such a huge extension.

For our list of each team's poison-pill contracts, see our team trade assets page.

Rule 3: Some players can't be traded, period.
There are two types of contracts that can't be traded under any circumstances.

The first is for players in their rookie contract who sign a one-year tender offer. Stromile Swift did that last summer for the Grizzlies. Because he signed the Grizzlies' tender offer, he cannot be traded and will become an unrestricted free agent this summer.

The second is for players who sign a one-year contract with a team using the team's Bird rights. Teams that own players' Bird rights can go over the cap to re-sign their own players. However, if the player signs a one-year deal, he cannot be traded. Toni Kukoc is an example of a player who fits this rule.

Other rules also can prohibit a player from being traded.

# A team acquiring a player in a trade can trade that player straight up for another player immediately. However, if a team wants to package the player with another to make a trade work under the 15 percent, $100K rule, it must wait 60 days. For example, the Nets could not turn around and package Cliff Robinson and Ron Mercer in a trade, because they just acquired Robinson. However, they could trade Robinson to another team straight up.

# If a team matched an offer sheet to a restricted free agent in the summer, it is prohibited from trading him for one year, unless the player consents to the trade. Furthermore, he cannot be traded to the team that issued the offer sheet for one year, with or without the player's consent. This rule prohibits players such as Mo Peterson and Etan Thomas from being traded without their permission.

# Players claimed off waivers can't be traded for 30 days if claimed during the season.

# Teams cannot trade for players they've traded away for the rest of the season, unless the player has been waived. That means fans hoping the Nuggets will trade Kenyon Martin back to the Nets before the trade deadline are out of luck.

# A very small number of players have "no-trade" clauses in their contracts. To get one, a player must have been in the league eight years and have played for the team he's signing the contract with for at least four consecutive years. The clause basically states that a player cannot be traded without his consent. Kobe Bryant is an example of a player who has a no-trade clause in his contract.

Rule 4: Watch out for the trade kickers.
A number of players have a provision in their contracts that pays them a one-time "assignment bonus" if they are traded. These bonuses range from 5 to 15 percent of the total value of the remaining contract. Nicknamed "trade kickers," these little devils can derail a deal.

The trade kicker goes into the calculation of a player's salary for trading purposes. Although the player receives the money at the time he is traded (some teams will send along cash in the deal to help the receiving team pay the bonus), it's averaged over the life of the deal for cap and "trade value" purposes.

For example, Wally Szczerbiak has a 10 percent trade kicker in his contract. He has $55 million left on his contract and makes $9 million this season. If he's traded before the deadline, he'll receive a $5.5 million bonus. Because Szczerbiak has five years left on his contract, his salary for cap purposes will go up by $1.1 million each of his five years in the league.

That could cause big problems if a team isn't aware of the kicker, because, for trade purposes, Szczerbiak's outgoing value is still $9 million, but his incoming value to the team that acquires him is now $10.1 million.

This exact situation almost derailed the Shaq-to-Miami trade this summer because of Lamar Odom's trade kicker. Luckily, as with most of the rules here, there's a way around it.

Players have the option of waiving whatever portion of their trade kicker is needed to make the deal work financially. If he doesn't want to be traded, he has some leverage to slow down the process.

Trade kickers are common enough that teams have to be careful. Roughly 40 players in the league currently own one.

Rule 5: Draft picks can't always be traded.
Teams are restricted from trading away future first-round draft picks in consecutive years.

That means teams that already have traded away a 2006 pick (like the Pistons) cannot trade their 2005 pick before the draft.

This may be the most paternalistic rule in the collective bargaining agreement. It's known as the "Ted Stepien Rule" and was created after Stepien, a former Cavs owner, made some pretty awful trades that cost the Cavs multiple future first-round picks in the early '80s.

With the way Isiah Thomas is going in New York, they might have to rename this the "Isiah Rule" in years to come.

In essence, the league is trying to stop teams from shooting themselves in the foot by trading away draft picks in consecutive years sight unseen.

Again, there are ways around it.

First, a team that traded away its 2004 first-round pick before the draft can trade away its 2005 first-round pick the minute the 2004 draft ends. That's a pretty gaping loophole the league likely will shut at some point in the future. The thinking is that once the draft is over, the 2004 pick is no longer a "future" pick. Unless the team already had agreed to trade away its 2006 pick, it's free to make the trade.

The other loophole is simply to wait until the draft is over to make the trade. Once a team drafts a player, it is free to trade his rights to any team it chooses.