Email a copy of 'Valuing 2016 Opt-Out Clauses' to a friend
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By Matt Swartz | at
Email a copy of 'Valuing 2016 Opt-Out Clauses' to a friend
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mike156
Very niece piece, well reasoned and presented.
One of the less likely but possible risks in the opt-out is on the short end–JD Drew’s contract with the Dodger. He had a spectacular year with the Braves in 2004, signed a five year deal with the Dodgers with an opt-out after the second year. In 2005, he was injured and played only 72 games for them, then had a very good full season in 2006, and opted out for a five year deal with the Red Sox. Dodgers were not happy,
thechiguy
Genius! All those numbers in a filter that actually make all the sense in the world! I like the opt out clause for more reasons than the obvious. Players get to act like real free agents since free agency has almost been taken away by the Qualifying offer.
Justin Cox
How did you come up with the percent chance that each would opt out after this year? That seems like a pretty key value, but it’s not clear where it comes from.
cxcx
This seems to lose merit when you get to Kennedy and decide that you should measure different players by different metrics because you want to. Don’t get how it’s not totally arbitrary.
Also, where do you get the two-year, $27m figure for Kennedy? Baseball-reference has it at two for $21m, which makes a lot more sense. The point of the Kennedy deal always seemed to be that the Royals felt they needed an at least average pitcher for the next two years, but couldn’t immediately afford what this year’s market was dictating, what with their high payrolls this year and next, which is why they so severely backloaded it. By -reference, they are paying him less than ten mill this year, which totally makes sense.
thecoffinnail
So if Chen feels he can not beat a 3 year $52m contract by opting out ($17.3ish AAV) and Kennedy feels he can not beat a 3 year $43m contract by opting out then they only hold values of around $7m per year for Chen and $5m per year for Kennedy? That would pretty much mean that each player has become a Chris Capuano type player. Seeing as even mediocre starting pitchers are routinely signing 1 year contracts between $8-$10 million its hard to imagine both of these guys falling off an absolute cliff to where they are only worth $5-$7 million per year.. Besides, have you seen the 2018 free agent class? It is not out of the realm of possibility that each of these pitchers feels having guaranteed contracts into their mid 30’s as a positive thing. Rather than throwing caution to the wind in a deep free agent class in the hopes of achieving slightly more money. Your formula is logical for higher earning and younger players like Upton and Heyward. But, you are lacking in several variables when it comes to mid tier players. Kennedy alone valued at only $5m per even in an off year is laughable. His ability to eat innings and maintain an FIP between 3.75 and 4.50 makes him worth well over that.
bobbleheadguru
As a Tigers fan, the bottom line is that it is a WIn/Win deal. Getting a high probability of 2 prime years for a reasonable price is a no brainer.
Then he takes the opt out just as he is ending his prime years and the Tigers get a good draft pick and money freed up to use on another 28 year old guy or maybe they win a championship and break up the team with cheap, young guys at that time.
I would say that opt out is worth about $20MM to the TIGERS (not just Upton). What am I missing?
stl_cards16 2
You are missing that Justin Upton could be terrible or injured the next 2 years and the Tigers are on the hook for the remainder of the contract.
The risk with opt-outs is that the player is only going to stay if he is not worth the remaining dollars left on the contract.
These are huge risks for the team with zero risk for the player.
bobbleheadguru
The deal is an insurance policy for the player.
But the team can take out a real policy too.
The risk seems low at this point. Let us see what happens.
My main point is that a favorable outcome (which is almost 60% probability according to the article) is positive for BOTH parties. It is a GOOD THING if Upton opts out before he leaves his prime years.
stl_cards16 2
Yes, the only way this is a good deal for the Tigers is if Upton opts-out. If he continues being the Justin Upton we know, that’s what he’ll do. Then if the Tigers are smart they will let him walk.
But baseball is a funny game. Players fall off a cliff all of the time. If he turns out like his brother, the Tigers are sitting on one of the worst contracts in baseball.
My point is, it is definitely not a win-win scenario. It’s not that far-fetched that the Tigers could be regretting this deal badly in a few years.
bobbleheadguru
My understanding is that Upton wanted 7 or even 8 years. The Tigers counter offer was the opt out. Tigers come out ahead either way from that standpoint, based on what it would have taken to sign him.
stl_cards16 2
Ok Tigers come out ahead, sure. Haha
I don’t know how you don’t see that opt-outs are ONLY good for the player. Just as a team option is ONLY good for the team.
jd396
Except that opt outs/options get the deal signed. Typically a player can get more money if he agrees to an option for the team, and as noted in the article a team can pay less if they agree to an opt out.
It gives the other side some power to get the dollar figures where they want it to be.
stl_cards16 2
Yes in exchange for assuming extra risk in the contract.
bobbleheadguru
Bottom line:
The Tigers got Upton for BELOW projections because of the Opt out.