95. Can a player be given an extension and traded at the same time?
Similar to a sign-and-trade arrangement (see question number
92), a team may sign an eligible player to an extension (see question number
58) and immediately trade him to another team. Such an "extend-and-trade" is limited to three seasons, which include any seasons remaining on the player's current contract1. The salary in the first season of the extension can have a 5% raise over the last season of the existing contract, and subsequent raises are limited to 5% of the salary in the first season of the extension. The 5% limit also applies to both likely and unlikely bonuses.
A player cannot be traded in an extend-and-trade after the season (for example, on draft day) in the last season of his contract, or in any season that might be the last season due to an option or ETO.
Since an extend-and-trade has greater limits than a regular extension (three seasons and 5% raises vs. four seasons and 8% raises), the rules prevent teams from circumventing these limits by extending and trading the player in separate transactions.
If a team extends a player beyond the limits of an extend-and-trade (for example, if they sign a player to a four-year extension), they can't trade the player for six months. Conversely, a team cannot extend a player it receives in trade for six months, if the extension exceeds the limits of an extend-and-trade2.
Extend-and-trade transactions are rare. To date they have only been used for Kevin Garnett (traded from Minnesota to Boston in 2007) and Carmelo Anthony (traded from Denver to New York in 2011).
A rookie scale contract (see question number
47) can be extended and traded in an extend-and-trade transaction, although there is no benefit to doing so. A rookie scale extension can be signed immediately after the player is traded (such as with James Harden's trade to the Rockets in 2012), and a rookie scale extension (see question number
58) can be much larger than the extension allowed through an extend-and-trade.
1 The current season counts as one full year, even if the extension is signed as late as June 30. So if a contract is extended on June 30 with one full season remaining, only one new season can be added to the contract with an extend-and-trade.
2 This does not apply to extensions of rookie scale contracts. For example, the Oklahoma City Thunder traded James Harden to the Houston Rockets on October 27, 2012, and the Rockets signed him to an extension four days later.
