Cap Impact of Trades vs Cuts

[xwalker]

Simple Answer: All real money paid to a player by a team must hit their cap.

Money guaranteed but not yet paid is passed to the new team.

• Example:
  • 2 year, 40M contract
  • 10M signing bonus
  • 10M 1st year salary
  • Both years guaranteed.
  • 1st year cap hit is 15M.
• 
  
• If the player is traded in the Spring of the 2nd year:
  • Team 1:
    • Total paid to player was 20M. All of it must hit their cap.
    • 15M hit their cap in year 1; therefore, 5M must hit the cap in year 2.
  • 
    
  • Team 2:
    • Owes the player the guaranteed but not yet paid money.
    • The player gets the entire amount owed even if cut the next day.
• 
  
• If the player is cut in the Spring of the 2nd year:
  • The player received 20M in year 1 and 20M when cut.
  • The team took a 15m cap hit in year 1; therefore, they must take a 25M cap hit in year 2.

• In recent years, teams have started giving out smaller signing bonuses.
  • Most of the guaranteed money in contracts is now in the form of future guarantees.
  • This makes it possible to trade the player without a massive cap hit.

• Summary:
  • Determine how much real money a team paid to a player and that is how much must hit their cap over all years including the season after the player departed.