"What a stupid concept." (a line I get to use all too frequently)Insert "getting hit on the head lessons" GIF here.
"What a stupid concept." (a line I get to use all too frequently)Insert "getting hit on the head lessons" GIF here.
Agreed- something smells off here. At a minimum, this delay is probably not defusing any alleged tension that built up between JD and the organization during the drawn out negotiation process. Hope I am wrong because I want him on the team, but have a gut feeling the next details that trickle out will not be that he passed the physical and all is well.I’m actually a little concerned something came up from the physical that the team doesn’t like.
You mean the FedEx package didn't get lost? <end sarcasm>Agreed- something smells off here. At a minimum, this delay is probably not defusing any alleged tension that built up between JD and the organization during the drawn out negotiation process. Hope I am wrong because I want him on the team, but have a gut feeling the next details that trickle out will not be that he passed the physical and all is well.
Nailed it? Much of the discussion has been centered on the value of option years and Scott Boras with seemingly little angst that the deal was agreed to on Monday, JDM showed up to camp early Wednesday, and we are heading into the weekend without a passed physical. The lack of speculation was surprising to me, and I was expecting to see more posts similar to the one above from Sampo. Does the reported tension during the drawn out negotiation process combined with the additional foot-dragging from the Red Sox this week lead to an outright divorce or do people think things are far enough along that the deal gets amended to add some protections for the Sox? What sort of avenues would you like to see the Sox pursue?You mean the FedEx package didn't get lost? <end sarcasm>
Please explain how a 12/$360 deal for a 29yo Mike Trout would be better than the same deal with an opt out after year 4. "The sky is blue" is generally a true statement. "The sky is always blue" is not a true statement. Sometimes you win, sometimes you lose, sometimes...it rains. And then the sky isn't blue. But rain isn't all that rare.In that case, the 5/110 with an opt-out is good, but 5/110 without an opt-out would be better — because someone would give you an asset to assume the remaining 3/60, which would be below-market at that point.
The point isn’t that a club should never agree to an opt-out; it’s that a contract without an opt-out is always preferable to an otherwise equivalent contract with an opt-out.
Some questions:There’s always the possibility that one side or the other will behave foolishly. I don’t think that possibility should be given any weight when evaluating a contract ex ante — you have to presume that both sides will act in their rational self-interest.
In the absence of large contract inflation, this precisely requires someone to act foolishly* because it means someone has to exploit a market inefficiency at the expense of someone else. The value the Red Sox gain has to come from somewhere.Some questions:
Do you think it feasible JDM's performance will decline over the next 5 years? I do.
Do you think it feasible JDM will still be a very, very good hitter over the next 2-3 years? I do.
Is it unrealistic to think his wRC+ could look something like 140, 140, 130, 110, 100 over the next 5 years? I don't think so.
There is a likelihood that he will have 2 very good years, opt out, get 3/$60 or better, and not be worth whatever deal he signs afterward (or what would have remained on his Sox deal). He could make more than a straight 5/$110 contract (good for him) and the Red Sox would not be paying him for decline years (good for them). That doesn't require anyone to act foolishly, but it is better for the Red Sox than a straight 5/$110 deal. This exact scenario doesn't have to happen for it to be included in forecasting. The fact that it is (in my opinion) somewhat likely to be the case illuminates the idea that the opt outs are not unequivocally bad. I would have preferred a 2/$50 deal to 5/$110, but that wasn't going to happen and neither were team options. If his wRC+ goes more like 140, 140, (opt out) 150, 150, 150, I would still prefer the current contract to one without opt outs ex ante. Sure, we missed out, but a) no one is forecasting that and b) that $60M is going to go somewhere else.
From a financial/quant perspective the holder of the right to end a contract early always trades something for it at issuance. For example, if you buy a bond with an option to 'put' it back to the issuer you will get less yield than the same bond without that option. If the bond seller gets to 'call' the bond early they will pay a higher yield for that privilege. The same principle applies to more complex assets as well. Valuing the option properly takes a real quant but the principle isn't that out there.I took a course in options once. I know there’s a solid answer to the question of how to value player options. I just have no idea what it is. (Didn’t do so great in that class.) I bet Henry the Quant and his minions do, though.
Wait, what is the "risk to a player in the case of injury or poor relative performance" in a simple guaranteed contract? There is none. And conversely, there is no increased risk for the team.So opt outs decrease the risk for a player in the case of injury or poor relative performance while increasing the risk for the team.
The “they could trade him” argument is great in theory but in reality a contending team never takes a productive player to market two years into a long term deal. Maybe they should, but they don’t. The Yankees never would have traded A-Rod or CC at the time their options came up, but the opt out allows for a clean break.However, if a player has 2 great years and opts out, resulting in a better contract for the player. Then the player had excess value above the previous contract and the team could trade the player and receive an asset back in return.
So even in that case where the team had the foresight to predict an unexpected fall off, the opt out would prevent them from turning that foresight into an asset.
Right, that's why all players are traded while they have excess value and before they become free agents - so the controlling team can maximize that excess value in the player market. It's certainly better than having them produce that value for your own team. No player should ever become a free agent without being traded. And every other team prefers to give up assets in a trade for a player, rather than spending only money on the same or a similar player.This just won't die.
No one has ever argued that it is impossible that an player opt out works out favorably for the team.
However, if a player has 2 great years and opts out, resulting in a better contract for the player. Then the player had excess value above the previous contract and the team could trade the player and receive an asset back in return.
So even in that case where the team had the foresight to predict an unexpected fall off, the opt out would prevent them from turning that foresight into an asset.
The other case is that the player misjudges the market and opts out to receive a lesser contract. That is just the team benefiting from a bad decision and obviously can happen but is unlikely to happen.
So opt outs decrease the risk for a player in the case of injury or poor relative performance while increasing the risk for the team. At the same time, it caps the upside for the team shifting upside to the player.
However, team's negotiate opt outs as a player benefit to avoid giving more money or some other benefit.
No team has ever negotiated for a contract like this:
After both sides agree on 5 year at 20 MM per year without an opt out. Then the team says -- oh and by the way we also will let you opt out after year 2.
This is a lengthy explanation of Mauf's previous 2 liner.
I should have been a little more clear. The comparative risk I was referring to in this case would be a comparison between the simple longer term contract with opt out vs. length of contract being the option period. That is, comparing a 2 yr/40 MM deal with a 5 yr/100 MM deal with a 2 yr opt out when the salary is identical in each year . The contract with the option protects the player against under-performance.Wait, what is the "risk to a player in the case of injury or poor relative performance" in a simple guaranteed contract? There is none. And conversely, there is no increased risk for the team.
According to the link below, the Price deal was reported on Dec 1 and he was introduced on Dec 4. Lots of other stuff in there, too, but don't waste your time if you're craving even more scintillating discourse on the quantum economics of opt outs.Didn’t it take 3 days between the announcement and press conference when David Price signed a couple of years ago? Given the amount of money involved, I’m not surprised it has taken this long.
It doesn't take someone acting foolishly or exploiting an inefficiency, because every team values every player differently, is at a different place on the win curve, and has varying resources to expend. Contracts are offered and signed on forecasts, not actual performance, so the error bars are large. We just saw this as the apparent only serious bidders for JDM. He was worth more to us than any other team, and we had more to spend. Did we act foolishly in signing him?In the absence of large contract inflation, this precisely requires someone to act foolishly* because it means someone has to exploit a market inefficiency at the expense of someone else. The value the Red Sox gain has to come from somewhere.
*here I am using "foolish" to mean doing something irrational with respect to reasonable value not foolish like "after JDM opts out, Yankees offer 6/$210"
EDIT: That's obviously not to say everyone *will* act rationally, but I don't think it's a good idea to assume that if JDM has a great 3 years and opts out the Red Sox will be inherently smarter than 29 other teams with respect to properly valuing him over the course of a hypothetical new contract.
I trust that I'm far from alone as I eagerly await the inevitable, fresh and insightful pontifications from our resident savants on the ramifications of such revised WAR calculations vis-a-vis JDM and the dual opt outs.In that case the corner IFers position adjustments should be increased and other positions decreased. This would significantly bumb the WAR At 1B, 3B and DH (which is based on position adjustment for 1B)
JDM is more valuable than we thought .
It doesn't necessarily have to be a major issue, but rather the two sides can't come to an agreement on how to handle it.This is starting to worry me. What could they have found in his physical that is this concerning?
Or if it's a longer-term concern they could just ditch the opt-outs and give him 2/54. 0r 2/46. I'm not sure.No news has me thinking JDM may be a repeat of JDD.
Depending on the problem any issue with body part X in the first 2 years turns the player options to team options. Something like that.
Whatever, the offseason from hell continues.
You're missing the point. IT'S THE OFFSEASON FROM HELL!!!!!!!!!Or if it's a longer-term concern they could just ditch the opt-outs and give him 2/54. 0r 2/46. I'm not sure.
Lackey had something like this contract-wise (not specific injury-wise) which eventually resulted in a clause that the Sox were able to exploit to acquire Allen Craig.The closest thing I can think of is Napoli's hip, but I doubt this is a hip. paging DRS?
"exploit"Lackey had something like this contract-wise (not specific injury-wise) which eventually resulted in a clause that the Sox were able to exploit to acquire Allen Craig.
Well, if they don't win the World Series this year this historic drought will reach five seasonsYou're missing the point. IT'S THE OFFSEASON FROM HELL!!!!!!!!!
Speaking of Allen Craig, JDM had a Lisfranc injury, which is what effectively ended Craig’s career. That’s definitely worth thoroughly exploring when you have 110 mil on the line.Lackey had something like this contract-wise (not specific injury-wise) which eventually resulted in a clause that the Sox were able to exploit to acquire Allen Craig.
I agree in general, but the fact that it has been noted that the injury would not have any effect on his immediate career would make me to believe it is something else similar to Napoli or another degenerative condition. A Lisfranc injury would have an effect on his immediate career.Speaking of Allen Craig, JDM had a Lisfranc injury, which is what effectively ended Craig’s career. That’s definitely worth thoroughly exploring when you have 110 mil on the line.
JDM’s injury has been reported as a Lisfranc sprain. It took a while, but I did find an article that specifies Craig’s was a Lisfranc fracture.Speaking of Allen Craig, JDM had a Lisfranc injury, which is what effectively ended Craig’s career. That’s definitely worth thoroughly exploring when you have 110 mil on the line.
I'd assume it would have to be better then that, since it did appear Arizona (who probably possessed previous knowledge of the issue in question from their own physicals) had some type of hold out interest until the very end, and I'm guessing Boras/JDM might end up screaming bloody murder at this point that the Sox potentially screwed them out of getting a better deal given Arizona already pulled the trigger on Plan B.Or if it's a longer-term concern they could just ditch the opt-outs and give him 2/54. 0r 2/46. I'm not sure.
My understanding is that those benefit the team.Good thing they gave him the two opt-outs, then
Though sources stressed to FanRag Sports that Martinez is currently healthy and ready to play, it appears some kind of issue has arisen in Martinez’s medical reports that is delaying the official completion of the deal. Right now, both sides are being cautious and expect a deal to be completed, with the delay mainly stemming from a desire to make sure the exact language of the contract is right in light of any potential issue.
Good thing they gave him the two opt-outs, then
Unequivocally. That's why team's push so hard for them!My understanding is that those benefit the team.