Houston Rockets vs. Chicago Bulls pursuit of Carmelo Anthony – Trade or Sign?

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The Carmelo Anthony sweepstakes is about to begin, once Melo formally exercises his early termination option (expected June 23) and shows his intent to become a free agent. As reported last week by Yahoo’s Adrian Wojnarowski, the Houston Rockets and Chicago Bulls appear to be the front runners to acquire his services.

At that point the question becomes, will the New York Knicks be willing to entertain sign and trade options or will they play a game of chicken with Melo and refuse to sign and trade, forcing him to either re-sign with the Knicks or take less money from another team?

It has also been reported that either the Rockets or the Bulls, can under certain circumstances sign Carmelo Anthony without a sign and trade although they would not be able to offer as much salary. The straight free agent signing would reportedly be in the neighborhood of $19 million in year 1 of the contract. We’ll look at how this would work for each team a little later.

In a sign and trade transaction, the advantage to the player is he can be paid what he would have been paid by his current team. The current team can offer more than any new team, per the NBA CBA (collective bargaining agreement). The advantage to the Knicks in a sign and trade is they get something in return as opposed to well, nothing. There is also advantage to the new team as we will discuss in more depth.

The Rockets and the Bulls may find themselves preferring to take different paths.

In a sign and trade just like regular NBA trades, if a team is over the NBA salary cap as all 3 teams are, the dollars incoming and outgoing must match in some fashion for both teams.

In this case the key number is Melo’s 2014-2015 salary of $23.3 million. For the purpose of this discussion we’ll assume Melo would prefer to stay at or near that amount. Not much of a reach, is it? Per the NBA CBA, the other salaries must be within 125% of each other (which is $17.575 million).

Also with sign and trade there is no need for teams to make cuts in order to get below the salary cap before making a free agent signing.

For the Rockets to complete a sign and trade and get to at least the $17.575 number, Jeremy Lin and Omer Asik would have to be included. There is no other mathematical way for them to get to that number without including them outside of Dwight Howard or James Harden. However given the $15 million each in actual salaries due Lin and Asik in 2014-15, it’s believed that the Rockets will have to include other assets to make it agreeable even to a wealthy team like the Knicks.

Here are 2 sample options with the sign and trade scenario for the Rockets:

Heading into the 2014-15 season the Rockets will be over the NBA Salary Cap of $63.2 million. This is important and is part of the reason the Rockets will prefer to do this transaction as a sign and trade as we will see.

In option A, the Rockets offer the Knicks Asik and Lin along with Isaiah Canaan & Robert Convington to make the dollars work. The Knicks are said to have interest in Asik, potentially longer term. They may also be willing to roll the dice on Lin, but even without more “Linsanity” he’s by far a better option than Raymond Felton.

Canaan & Covington along with a couple future 1st round picks compensate the Knicks for taking on the additional salary in 2014-15. Troy Daniels could potentially be included instead of either. Or the Knicks could choose to flip Lin or Asik to another team or bring a 3rd team into the mix for a 3-way trade if they aren’t willing to take on both Lin and Asik.

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In option B, instead of the cheaper former D-league players with potential we included a likely more attractive player, Donatas Motiejunas instead. In this scenario, I would expect the Rockets to also include a future 1st round pick.

But as you can see, from the Rockets perspective it allows them to field a team that still has some depth along with the 3 superstars. Chandler Parsons, Patrick Beverley, Terrence Jones remain along with the young players who starred in the D-league this past season. Assumptions are made here that Francisco Garcia exercises his option, although that can go either way.

This move keeps Chandler Parsons in the mix and if he allows them the time to complete the sign and trade they can sign him to a long term deal immediately after. His signing/extension will vault the Rockets into the NBA tax payer area, but as mentioned here previously, owner Les Alexander is not concerned with that if the team is championship caliber.

Cap holds must stay in place for unsigned draft picks once the draft is completed as if they had been signed already and teams must count at least 12 players or roster spots (if vacant) with at least the league rookie minimum salary.

I mentioned the fact that in this scenario the Rockets are over the salary cap both before and after this sign and trade. This allows them to also use the Mid-Level Exception (MLE) on a free agent this off-season ($5.305 million). If they dip below the salary cap prior to the sign and trade they will not be able to use it.

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In option A where the Rockets keep Motiejunas, the MLE could be used on either any number of positions, a backup point guard, a wing defender (Thabo Sefolosha, Shawn Marion) or a big man.

In option B the Rockets would most likely use the MLE on a center.  On a team like this you’d have to wonder if players like Pau Gasol, Emeka Okafor or Spencer Hawes, although a cut in pay, would take the MLE in order to play for a championship as others have done in the past. All just possibilities, but it certainly gives them one salary slot to add a player well beyond the veteran minimum.

And as we mentioned earlier, from Melo’s standpoint it allows the Rockets to offer him a financially similar deal to the Knicks, making the Rockets even more attractive to him assuming they have the best sign and trade offer.

So, what about the Bulls sign and trade possibilities?

Much like the Rockets with Lin and Asik, the Bulls have to do something about Carlos Boozer’s fat contract. They can amnesty him, essentially removing him from their books and cutting ties with him since they still have their amnesty option left. Otherwise they would likely have to convince the Knicks to take Boozer as part of a sign and trade as you can see below.

The problem with sign and trade for the Bulls is they really only have a couple of choices. In option A, they would have to include Carlos Boozer along with either Tony Snell or one of this year’s 1st round selections. Would the Knicks have any interest in Boozer? They would not be able to amnesty him as their amnesty has already been used.

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Boozer would be an expiring contract but so would Lin and Asik if they chose to use them in that way and clearly Lin and Asik combined is greater value to the team than Boozer in the interim. The Bulls would also have to include multiple future 1st round picks as well to attempt compete with the Rockets offer if Boozer is the main salary piece.

The Bulls only other option, if the Knicks said “no” to Boozer, is to essentially gut their team and send all players outside of Derrick Rose, Joakim Noah and Boozer to the Knicks instead. I suspect as much as the Bulls may want Melo, giving up all that and having to fill out the remainder of the team with veteran free agents at the veteran minimum, doesn’t necessarily make them better.

The Bulls would still likely amnesty Boozer in order to prevent paying Brooklyn Nets type luxury tax, by the time they round out the roster with veteran minimum players who would add in the neighborhood of $1 million per roster slot. Owner Jerry Reinsdorf, if nothing else has shown historically that he leans to the financial frugal side when given a choice.

The oft-injured Derrick Rose complicates this a bit as well. By putting all their eggs into the stars baskets in Option B, if Rose continues to struggle to stay healthy, are the Bulls any better than the Knicks have been with Melo?

Sign and trade seems to clearly favor the Rockets.

Next we look at a straight free agent signing instead of sign and trade.