The Knicks are in serious trade discussions with the Houston Rockets involving Tracy McGrady. Yahoo! Sports first reported on the rumored aspects of the trade and I broke it down even further.

The trade is a gamble. Plain and simple. The valuable assets the Knicks would give up are Jordan Hill, the 8th overall pick in the 2009 draft, and a 2012 first round pick. They also exchange 2011 first round picks with the Rockets, but I’ll call this a wash since they’ll still own a first round pick in the draft that year. Therefore, the Knicks lose the valuble assets of Jordan Hill and a 2012 first round pick.

What do the Knicks gain in return? Question marks surround Tracy McGrady. What is it that the Knicks are getting out of this deal? The answer is cap space. Flexibility. The ability to sign two max contracts in the 2010 free agency period.

The inclusion of Jared Jeffries along with Jordan Hill’s contract frees up about $10 million more to spend this summer.

This trade doesn’t gaurantee the Knicks sign a top free agent this summer. It guarantees the Knicks have enough cap room to sign possibly two free agents to max contracts. 

This trade isn’t about getting McGrady and asking him to lead the Knicks into the playoffs this season. With just over 30 games remaining, it doesn’t seem likely the Knicks will be playing post-season basketball this year. The only other thing this trade does is give the Knicks a first hand view of McGrady; An audition for him. If all else fails in free agency, they can sign McGrady if he does well during the rest of this year for the Knicks.

The most important aspect of this trade, though, is freeing up cap space. The Knicks are bascially saying it’s ’2010 or bust’. That’s where the gamble lies. To be a cliche, they are putting all of their eggs in one basket. They don’t have a first round pick in 2010, they will be trading away Jordan Hill, their 2009 first round pick, and also will be trading their 2012 first round pick. That means in the four year span from 2009-2012, they’ll have one first round pick and it will be the Rockets pick in 2011.

If the Knicks sign one or two of the top free agents, then the draft picks mean nothing. They won’t be lottery picks. But if the Knicks can’t get their hands on at least one of the top five or seven free agents, they may be in trouble for years to come because of the lack of first round draft picks.

It’s a risk and the Knicks look as though they are willing to take it. The free agent pool is so deep with talent that even if the Knicks don’t get LeBron James, Dwayne Wade or Chris Bosh, they’ll still be able to sign very good players. They could even sign three second-tier free agents if the players don’t covet max contracts. But if the Knicks can only land one second-tier guy like Joe Johnson or Carlos Boozer, it may not be enough to turn the Knicks into contenders. With one very good player, not a superstar but a very good player, and a lack of draft picks, the Knicks may not be able to build a strong team. In that case, the 2011 free agency period becomes critical for the Knicks, but it doesn’t have the depth of the 2010 class. Carmelo Anthony leads the 2011 free agent class.

With the reported trade with the Rockets, Donnie Walsh will have given the Knicks the possibility to make a huge splash this summer. That’s half the battle. The next step is luring the big names to the Garden.

If summer of 2010 wasn’t critical enough for the Knicks, critical takes on a whole new meaning now.

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