NBA free agency explained for beginners

NBA free agency allows teams to negotiate new contracts with players who are no longer under contract (free agents). During this time, teams may also offer contract extensions to their own players and trade with other teams.

NBA free agency features multiple types of contracts, multiple exceptions and the salary cap.

This guide explains some basic terms of free agency.

NBA free agency has two types of free agents

An NBA free agent is any player whose contract has expired. There are two main types of these players: unrestricted and restricted.

An unrestricted free agent (UFA) is free to sign with any team he would like. His contract is over, and he has no obligation to his former team or the other way around.

2022 example: Jalen Brunson was an unrestricted free agent after playing four years for the Dallas Mavericks. He agreed to a deal with the New York Knicks.

A restricted free agent (RFA) may sign a contract with another team, but his original team has the right to match the contract to keep him on the roster.

Teams have to extend qualifying offers to their restricted free agents in order to be able to match the contracts they receive from other teams. If this doesn't happen before NBA free agency begins, a restricted free agent becomes unrestricted.

2022 example: The Cleveland Cavaliers extended a qualifying offer to Collin Sexton. If another team offers him a contract, the Cavaliers will be able to match it and keep him on the roster.

Player and Team Options

NBA contracts may include either a Player Option or a Team Option. These options allow players and teams to extend or terminate contracts for another year.

If a player has a Player Option on his contract, he may decide to exercise it to play for his team for another year or reject it to become an unrestricted free agent.

2022 NBA Free Agency examples:

• Kyrie Irving exercises a Player Option on his contract to stay with the Brooklyn Nets for another year
• P.J. Tucker rejected a Player Option on his contract with the Miami Heat and signed a new deal with the Philadelphia 76ers
• James Harden rejected a Player Option with the Philadelphia 76ers in order to sign a new deal with the team

Team options allow NBA teams to keep their players for another year. If this option is declined, the player becomes an unrestricted free agent.

2022 NBA Free Agency examples:

• The Oklahoma City Thunder declined a Team Option on Lu Dort and then negotiated a new contract
• The Los Angeles Lakers exercises a Team Option on Stanley Johnson and will keep him for another year
• The Detroit Pistons declined a Team Option on Luka Garza

NBA Free Agency exceptions

Each NBA team has the same salary cap and crossing it will put them at a disadvantage. Furthermore, there is a luxury tax cap that penalizes teams that cross a certain threshold.

There are, however, several ways for NBA teams to exceed the salary cap. These are called exceptions, and the league currently has ten. The two most important ones are Qualifying Veteran Free Agent Exceptions ("Full Bird Rights") and Non-Taxpayer Mid-Level Salary Exceptions ("MLE").

Bird Rights have been implemented to help teams retain their own players. To qualify for this exception, a player must have played with the same team for three seasons.

Teams may use this exception to give their players a max salary of 25% to 35% of the salary cap.

2022 NBA Free Agency example: Bradley Beal signed a five-year $251 million contract with the Washington Wizards.

The Mid-Level Salary Exception allows NBA teams to sign valuable role players in free agency. However, it is only available to teams that are above the cap and not paying the luxury tax.

This exception may be split among different players and teams can use it to sign players to contracts of up to four years.

2022 NBA Free Agency example: The Portland Trail Blazers signed Gary Payton II to a three-year $28 million contract.