The Stretch Provision allows an NBA team to lessen the salary cap hit of a bad contract. Moreover, it says that if an NBA team waives a player and that player’s contract clears waivers and is not picked up by another team, then the original NBA team can pay out the remainder of the guaranteed money in the contract over twice the remaining life of the contract plus one year. The formula is as follow:
Remaining Salary / (2 * (Years Remaining on Contract) + 1) = Yearly Salary Payments
For example, in 2017-2018, Luol Deng, who possesses the least tradable contract in the NBA, has two years remaining on his contract with the Lakers totaling $36.81 million. In order to clear cap space, the Lakers should waive Luol, and assuming he is not picked up off the waivers, his contract will be divided as follows:
$36.81 million / (2*(2) + 1) = $7,362,000 in yearly payments
With this in mind, the Lakers would be able to take a five-year salary cap hit of $7.362 million a year instead of two ~$18 million hits in 2018 and 2019. This would free up over $10 million in cap space each year for the next two years.
I'm Jake, a recent graduate of Duke University pursuing a career in collegiate or professional basketball operations.
Cap #s 2018 - 2019
Salary Cap: $101.869M
Lux. Tax: $123.733M
Tax Apron: $129.827M
Tax Floor: $91.682M
Room MLE: $4.45M