Rockets plan to use larger mid-level exception after trading Ariza

By dipping further away from the hard salary cap, Houston opens up the potential of using the full mid-level exception for a free agent.

The Houston Rockets plan to use the largest mid-level exception (MLE) to sign a free agent this offseason after trading Trevor Ariza’s salary into Detroit’s cap space, according to media reports.

The full MLE is worth a starting salary of ~$9.3 million, which is what Houston will now be able to offer when free agency opens this Friday. Per ESPN’s Tim MacMahon, the Rockets believe this will allow them to sign a “significantly better player” than by offering the smaller MLE.

The tradeoff with using the “full” MLE is that it implements a hard salary cap at the luxury tax “apron” level of ~$138.9 million. Without shedding Ariza’s $12.8-million salary, Houston’s team payroll (with a full MLE addition) would have almost certainly exceeded the hard cap. Thus, Houston would have been limited to the “taxpayer” MLE (~$5.7 million).

The Rockets will also generate a sizable traded player exception (TPE) in the deal, since Ariza is being absorbed into cap space by Detroit. However, Houston probably can’t use the full TPE and the larger MLE this offseason, since using both would likely push them over the hard cap.

Depending on future moves by Rockets GM Rafael Stone that might alter team payroll, that TPE could potentially prove useful down the line. (The TPE will last until an equivalent point in the 2021 offseason.) Or it could be used in the interim, but in a smaller amount.

In the Ariza salary dump, the Rockets also traded the No. 16 pick in Wednesday’s 2020 draft for a future first-round selection (with protections) from Detroit. Houston believes that a future pick could have more value in trade talks, as opposed to a prospect that has already been selected, according to Jonathan Feigen of the Houston Chronicle.

Free agency is set to open at 5:00 p.m. Central on Friday.

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