How Cap Space Actually Works
Why the Rangers could fit a $3.75 million player with only $1.5 million in cap space
Welcome to Hockey Curious.
The NHL’s trade deadline is in 15 days. In today’s newsletter we’ll be going over:
Current cap space
Cap space accrual
Current cap space as a team-building resource
When initial reports broke that Vladimir Tarasenko was headed to New York, I’m sure many, myself included, rushed over to the Rangers’ CapFriendly page to see how much cap space they had.
At the time of the trade, the Rangers were projected to end the season with $1,521,427 in cap space. But Tarasenko retained at 50%, has a cap hit of $3,750,000.
So how were the Rangers able to make this work?
We are used to thinking about the salary cap and a player’s cap hit as a lump sum. This season, NHL teams cannot spend more than $82.5 million and Connor McDavid’s total cap hit is $12.5 million.
However, when we break it down, salaries and cap space are actually calculated by prorating the total sum daily.
Think of it like this, if McDavid is paid an equal portion of his salary every day of the season ($12,500,000/185 days), $67,567 is contributing to the total $82.5 million per day.
McDavid’s daily $67,567 cap hit would accumulate for every day he is on the Oilers’ roster. So, on the 100th day of the season, McDavid will have taken up $6,756,756 of Edmonton’s cap space.
Every day, the daily cap hits of the entire Oilers’ roster are summed to create Edmonton’s total daily cap hit and accumulated with the previous days.
How do teams know if they are operating under the salary cap?
They project the remaining cap hit for the season by assuming that the most recent day’s roster remains the same until the end of the season. This is then added to the current cap hit to see if they are projected to operate within the salary cap limits.
Cap space accrual
What happens if a team’s projected cap hit is below the upper ceiling of the salary cap?
When this happens, they begin to gather cap space for every day they are below the salary cap.
For simplicity's sake, let’s say a team has $1,000,000 in projected cap space at the start of the year. If they add a player with a total cap hit of $1,000,000 on day 1 of the season, they would pay that player’s total million over the season, wiping out their $1,000,000 of space.
If they waited and traded for the player on the 100th day of the season, $540,540 of the cap hit would have already counted against the books for the other team. Only the remaining $459,460 would count against the acquiring team’s total salary cap.
But we don’t look at players by their daily cap hits, we look at them through their total cap hits.
So how do we find which players fit under the salary cap on any given day of the season?
To calculate the total cap hit value a team can acquire at a certain point in the season, one uses this equation:
Projected Cap Space * (Total Days in Season / Days Remaining in Season)
As we can see, the closer teams get to the trade deadline, their cap space accumulates exponentially.
Tarasenko was acquired with 64 days left in the season. The Rangers’ $1,521,427 in projected cap space was equivalent to $4,397,875 in total cap hit value. With St. Louis retaining 50% of the contract, Tarasenko’s total cap hit to the Rangers became $3,750,000 which left enough room to take on Nikko Mikola as well after some roster moves.
Current cap space as a team-building resource
Contenders that operate under the salary cap will have the most amount of available cap space come the trade deadline. They can use this room to add a player they couldn’t otherwise fit at the beginning of the year. This works best with a rental as they wouldn’t have the benefit of cap space accruing the following year if all else remained the same.
Asset harvesting teams can use their accrued cap space to broker trades as a third party to retain salary in return for future asset capital or by taking on inefficient contracts that are expiring.
Below is the current and deadline cap space for teams not in LTI.
And these are the teams with a player on Long-Term Injury. When in LTI, teams’ current and deadline cap space is equal to their remaining LTI pool.
I’ll be updating these tables in new posts as we near the deadline.