Red Sox sign David Price

This probably has been noted upthread, but my eyes are glazing over because of all the opt out clause debates, so I'm skipping to the end: The single most important consideration in this scenario is that the Red Sox are all in for 2016. Their actions thus far this offseason clearly indicates this. That is as it should be, because there is no greater way for them to honor the franchise's current face, Ortiz, than by giving him one last shot at a 4th ring, and the chance to retire after a World Series victory. Baseball is surely about more than that kind of sentiment, and there are oodles of numbers that suggest there is certifiable risk inherent in this contract, and even in this type of pursuit-the signing of free agents to long term deals, the moving of highly regarded prospects for elite talent on expensive contracts, etc. I've been the voice on that side of the ledger many times, and logically, I understand all the arguments, which certainly have merit.
Flags fly forever, and if (when!) Ortiz gets to hold one in his final duck boat parade, I doubt anyone will regret today's news...ever.

Say David Price pitches lights out for three years-Don Drysdale, Koufax, Denny McLain-like and so he opts out(who can afford him!).
Yankees!
If Price is good it sets up AL East Sox v. Yankees for next 7 years.
If not, hope for the Duck Boats in the first two seasons.

Rasputin said:

I'm not really sure I buy the notion that the Sox are the best team in baseball, but we're gonna be pretty good.

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Well, per that link, third, not first. But the Sox have also already likely made their big off-season moves, while most other teams haven't even gotten started. So fair to say other teams will add projected WAR whereas the Sox are likely to stay relatively constant from here on out.

Not that it really matters since it's just a rough listing anyway (and I'm not sure I buy the Sox as having the third best CF WAR in baseball after Trout and McCutchen, but hey, it's December, it's time to dream big).

Rasputin said:

Sure, but if they understood my position, they wouldn't be replying with answers that indicate they don't.

Also, given the possibility of me being wrong and some random person on the internet being wrong, well, I know where the good bet is.

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Because you're *not* some random person on the Internet?

86spike said:

And... He leaves a big ace-sized hole behind him in Toronto!

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Or, a big sized ace-hole ... but, to each his own.

Rasputin said:

There are some situations where a team can offer an opt out, the player can take it, and the team come out of it just fine. In those situations and all the others, the benefit of including the upside in the contract is all on the player's side when compared to the same contract without the opt out clause. Including the opt out clause might be worth it to the team if it means getting the player they want or getting the player for fewer dollars.

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Your original point was that all the optouts so far have all harmed the clubs associated. Despite tapdancing around to avoid using the term "benefit" the club here you seem to be coming around no?
"Came out just fine." "Worth it to the team."

A normal (large) contract has doesn't have a clause at the back end that activates if a player performs poorly. But a normal contract does lock in both parties the whole way. Decline and all.
An optout can break a team out of the decline phase if the timing works. And it's worked more than it hasn't so far.

I covered the planning issues around whether a player opts out or not earlier. I don't know why you are pushing this one. We agree.
Planning for player to leave via optout is harder than a normal contract and easier than death. Not rocket science.

Rasputin said:

Sometimes those risks are worth taking. Often, they are not.

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Past examples of optouts disagree with "often".
There have been ten (well 11 now). How many of these constitute often?

Just parking the opt-out for a moment, is there a quantifiable view of the value of the pick we didn't lose in this signing?

I love SOSH, I really do. the Red Sox pick up the best available pitcher on the market, possibly the best pitcher in the American League, don't give up anyone in trade or even a draft pick - and 90% of the discussion is about an opt-out with 90% of that against it. I guess it keeps the discussions about personality, health risk, AAV and all the other nonsense to a minimum.

Reading through this all - it's obvious what the impact of the opt-out is:

- The Red Sox approached Price and said, "We'll guarantee you $217M, David - but in addition, we'll let you opt out after 3 years if you desire. Decide right now. Sign here."

- If Price (or any other quality pitcher on a high value long term deal) gets injured or screws the pooch, welp - that's life in the MLB folks. Pay to play.

- There are 2 examples where the opt out can benefit the Red Sox (it always benefits the player): (a) He's pitching for another contract 3 years down the road, and (b) Some asshole (like the Yankees) decides to give him a ridiculous contract to watch him decline in years 5, 6, 7, 8, 9, 10...good on yer

- If he's that good, the Red Sox will look at the AAV of great pitchers in 2019 and decide whether or not to rebid. Start the game over but in a new market with new options.

BTW, if he opts out, the Red Sox get a draft pick, for whatever that's worth

What a fantastic deal and play by ownership. Unexpected.

Lowrielicious said:

Your original point was that all the optouts so far have all harmed the clubs associated. Despite tapdancing around to avoid using the term "benefit" the club here you seem to be coming around no?
"Came out just fine." "Worth it to the team."

A normal (large) contract has doesn't have a clause at the back end that activates if a player performs poorly. But a normal contract does lock in both parties the whole way. Decline and all.
An optout can break a team out of the decline phase if the timing works. And it's worked more than it hasn't so far.

I covered the planning issues around whether a player opts out or not earlier. I don't know why you are pushing this one. We agree.
Planning for player to leave via optout is harder than a normal contract and easier than death. Not rocket science.



Past examples of optouts disagree with "often".
There have been ten (well 11 now). How many of these constitute often?

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I wish you would stop trying so hard to misunderstand me. The opt-out clause is an enormous benefit to the player. It's not the only clause in the contract. Losing any given player isn't necessarily going to make a team terrible. Neither of the previous two sentences means the team isn't harmed when the player opts out.

Seriously, the counter examples to your argument are the ones you gave. A-Rod opted out. The Yankees felt the best replacement for A-Rod was A-Rod at a longer, more expensive contract. Sabathia opted out. The Yankees felt the best replacement for him was him on a longer, more expensive contract. If the best options hadn't been the same players, whoever the Yankees signed would almost certainly have cost the Yankees more than what A-Rod/Sabathia opted out of, delivered a lot less in the early years of the contract, or both.

The cost of talent doesn't generally go down. If a player opts out, he thinks he can get more money and he's probably right.

Papelbon's Poutine said:

Because you're *not* some random person on the Internet?

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Nope, I'm a very carefully curated person on the internet.

moved

Like most of the rest of you, I'm a fan of this signing.

F the opt out, I have zero angst about that.

I'd be interested to know how much value the Sox receive by winning a post season series. Price gets $217 million for his 7 years of regular season performance. It's not like he costs the Sox nothing for post season starts but how much of the $217 million do the Sox recoup with him leading the team deep into the post season? Obviously it wouldn't only be Price that is responsible for winning postseason games but I wonder if a big part of the calculus of this signing and the Kimbrel trade is how much the Sox earn by playing a postseason series or two for each of the next 3 years.

Rasputin said:

I wish you would stop trying so hard to misunderstand me. The opt-out clause is an enormous benefit to the player. It's not the only clause in the contract. Losing any given player isn't necessarily going to make a team terrible. Neither of the previous two sentences means the team isn't harmed when the player opts out.

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I think I am misunderstanding you better now. A club can be harmed even if it actually ends up better off on the whole. Got it.

The Yankees planned poorly and reupped both Arod and Sabathia. That is what hurt them, not the opt-out itself.

geoduck no quahog said:

- The Red Sox approached Price and said, "We'll guarantee you $217M, David - but in addition, we'll let you opt out after 3 years if you desire. Decide right now. Sign here."

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We don't even know where the opt-out came from. Word is that Price was ready to sign with the Cardinals and DDski swooped in and offered $30M more. The opt-out might have been part of the deal with the Cards, and the Sox had to match it in their offer. Who knows? It will be interesting to find out in the coming days how the deal was struck. For now, I just know that I like the idea of Price pitching for us the next few years.

I'm moving this back; that other thread is irrelevant (and was largely dead, to boot):

We are into Pascal's Wager territory with the opt-out.

Based on his career to date, Price belongs to a pretty elite group of pitchers. Setting aside the all time greats (Maddux, Pedro, Clemens, Johnson), there's a pretty good pool of pitchers that Price compares to, a number of whom (but not all) signed contracts around his age. The outcome of those contracts has been pretty mixed -- I'm not sure if those outcomes have been significantly more divergent than those for smaller contracts, but the risk is obviously larger.

Here are some examples of guys who probably would have exercised their David Price opt-out (with their fWAR listed from ages 30-36):

Kevin Brown: 6.5, 9.6, 7.3, 6.8, 3.0, 0.5, 6.1
Roy Halladay: 5.8, 6.1, 7.0, 6.1, 8.3, 2.7, -0.7
Cliff Lee: 6.7, 6.3, 7.0, 6.8, 5.0, 5.5, 1.9
Mike Mussina: 5.1, 6.0, 6.4, 6.9, 4.6, 6.1, 2.9
Tom Glavine: 5.3, 3.6, 4.8, 4.2, 4.7, 1.7, 2.8
John Smoltz: 6.7, 5.2, 5.4, 1.3, 2.5, 2.9, 2.1

Each of these guys were pretty awesome from ages 30-32, but there's no clear-cut argument about the cost/value of an opt-out. Despite missing 1 1/2 seasons, Kevin Brown was ridiculously good in his mid-late thirties. He would probably be worth the back end of an equivalent contract. This is definitely true for Mussina and Lee, and I think most would accept two truly elite seasons from Roy Halladay before his sudden decline. But even with that said, they weren't as good as they were in their early thirties. In fact, the only recent example that I can come up with is Andy Pettitte (who was mediocre/injured in his early thirties before being very good again).

Smoltz is a weird case, considering that he converted to relief (before converting back!). Glavine, who showed the most "classic" decline, was still pretty damn good from 34-37.

Now there are plenty of cases (some ongoing) of pitchers declining rapidly in their thirties (Appier, Santana, Verlander, for starters) but they don't really make the case for the opt-out since they definitely wouldn't exercise it.

Generally speaking, I think the opt-out is a pretty minor concession for the Red Sox -- obviously it's not in their favor to assume the risk while losing some of the upside -- but in every case you'd still be getting the player's best seasons.

This might be a dumb question, but have the Sox ever had three lefty starters?

If you would've told me in June that the Sox could get David Price without giving up Mookie, Xander, Eddie, Blake, or any other prospect, nor do they have to even give up a draft pick... You don't hesitate for a nanosecond.

Money be damned. They just got significantly better, with minimal obesity (Panda) or huevón (Hanley) risk.

Today was a good day.

shepard50 said:

Just parking the opt-out for a moment, is there a quantifiable view of the value of the pick we didn't lose in this signing?

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Estimates I've seen (including one from SoxScout on twitter) put it around $25-30m.

Dogman2 said:

Ok, Lowrielicious and Ras can continue via PM, the board is past the point of their discussion having any worth.

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Yeah, I'm sorry, I should have stopped a long time ago. It's a weakness.

Lowrielicious said:

I think I am misunderstanding you better now. A club can be harmed even if it actually ends up better off on the whole. Got it.

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You say this as a joke and don't understand how it can be true. You're looking at the whole instead of the specific. If you fall down a well and break your leg but find a bag full of cash, you may end up better off, but your leg is still broken and it still hurt like hell.

kieckeredinthehead said:

This might be a dumb question, but have the Sox ever had three lefty starters?

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Hurst, Tudor and Ojeda?

Rasputin said:

You say this as a joke and don't understand how it can be true. You're looking at the whole instead of the specific. If you fall down a well and break your leg but find a bag full of cash, you may end up better off, but your leg is still broken and it still hurt like hell.

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Hand me a bag with a couple million in it right now and I'll let you break my leg yourself. The whole matters more than the specific.

moondog80 said:

This is like the 78th most important thing here, but with Price and Betts (and JBJ and Young), when was the last time the Sox have had so many prominent black players? Rice and Jenkins and Cecil Cooper/George Scott in 76/77?

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I think you underestimate it a bit. I'm old enough to remember when the team, starting at the top, was on the wrong side of race issues. Happy to see a team built for the right reasons, namely sporting ones.

Rasputin said:

You still don't understand and this fact is frustrating me. I think I've already been rude and will probably be so more and I apologize, but it bugs the shit out of me when people can't or won't understand things that are very simple.

There are some situations where a team can offer an opt out, the player can take it, and the team come out of it just fine. In those situations and all the others, the benefit of including the upside in the contract is all on the player's side when compared to the same contract without the opt out clause. Including the opt out clause might be worth it to the team if it means getting the player they want or getting the player for fewer dollars.



A normal contract doesn't put risk on the team beyond the end of the contract. What we're looking at here is a 3/90 contract with a player option for 4/127 that is activated if the player performs poorly.



If Robinson Cano had an opt out this year, he wouldn't exercise it.



The difference is that if Greinke's arm had blown up in June, his contract wouldn't have ended and Price's still would have. Oh, and if he didn't have the opt out clause, he's still under contract and they aren't looking to sign a big free agent pitcher.

Let me reframe this a bit.

Player A is signed for a seven year deal with an opt out after three years. Player B is signed for a seven year deal with no opt out.

Both players perform very well for their first three years.

Player B dies. Car crash, plane crash, whatever, he dies. The team has insurance to cover the remaining salary so they aren't out of pocket any of that money. This is a bad thing for the team, right? They have to scramble around to replace that player.

When Player A opts out, it's the same thing. It's a bit more forseeable, and it means the supply of players to replace the player with is precisely one player deeper than if he'd died, but the effect is the same.

When you sign anyone to a contract, there's a range of things that can happen. They can perform poorly and be massively overpaid for a long time. They can perform excellently and be massively underpaid for a long time. When you sign someone to a contract with an opt out, you're accepting the risk of potentially massively overpaying them for a long time and giving away any possibility of massively underpaying them for a long time. When it's a free agent contract like this where the guy is being paid top dollar, you're also giving away any possibility of paying them about what they're worth for a long time.

It's seven years worth of risk for three years worth of upside. It's a massive risk to take on. Sometimes those risks are worth taking. Often, they are not.

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And your angst seems to assume that if he opts out, the Sox have to put $31 mil in a freezer each year for the next four years and do nothing with their pitching rotation. The reality is that in the year he would opt out, MATT HARVEY, CLAYTON KERSHAW AND JOSE FERNANDEZ may all very well be on the market. As well as David Price. And DD can throw the $31 mil plus inflation at any one of them. Why is this such a disaster?

E5 Yaz said:

Hurst, Tudor and Ojeda?

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Correct, 1983.

The Red Sox had one overarching need this winter, and it wasn't a closer – it was a legitimate top-of-the-rotation, difference-making starter, preferably one with some history of durability. There were two such pitchers available, and the Red Sox landed the one who doesn't require them to give up their first-round draft pick.

I particularly like that aspect of the deal, as Law points out

This is some crazy news to come home to after work. I'm a fan of the deal, and I like that they went out and got the deal done with the guy they wanted without hesitating.

If the Red Sox could get Price in his year 30-32 years and net a draft pick out of it, this has the potential to be the best contract in Red Sox history.

EDIT: Forgot to mention

E5 Yaz said:

The Red Sox had one overarching need this winter, and it wasn't a closer – it was a legitimate top-of-the-rotation, difference-making starter, preferably one with some history of durability. There were two such pitchers available, and the Red Sox landed the one who doesn't require them to give up their first-round draft pick.

I particularly like that aspect of the deal, as Law points out

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And he's younger. DD done good, folks.

So, if the narrative making the rounds is true, the Red Sox waited on Price while Greinke was was waiting on the Red Sox. Does that mean Boston was Greinke's first choice?

Sprowl said:

We'd make him far too anxious, and Zack knew that years ago. He's no dummy - maybe a little freaked out, but perfectly OK with that. He's a twenty-second century man.

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He could always opt out

E5 Yaz said:

So, if the narrative making the rounds is true, the Red Sox waited on Price while Greinke was was waiting on the Red Sox. Does that mean Boston was Greinke's first choice?

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I think it likely boils down to a matter of DD being content with either, but with an emphasis placed on the fact that he wanted whatever deal he could get done asap while not running the risk of coming up empty handed (or give a chance for some team to come out of left field with a crazy offer like Washington did on Scherzer last winter).

Given I expect the contracts of both to look fairly similar (minus an extra year on the older Greinke. Not sure why so many people seem to think he's not getting $30m/per+), I know I could have gone either way. With each looking better (imo) then being cornered into giving Cueto a 6 year deal.

nvalvo said:

Estimates I've seen (including one from SoxScout on twitter) put it around $25-30m.

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Thanks, that's a huge data point in evaluating the value of the contract.

E5 Yaz said:

So, if the narrative making the rounds is true, the Red Sox waited on Price while Greinke was was waiting on the Red Sox. Does that mean Boston was Greinke's first choice?

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Maybe, but I very much buy into the idea that Greinke wants to stay a Dodger and so wanted the best Red Sox offer to get LA to pony up. It will be interesting to see if St. Louis turns to Greinke having lost out on Price, as they seem willing to spend and would seemingly be a good fit.

So, if the saved draft pick is valued at 25-30 mil range. If something like the current system stays in the new upcoming CBA, if he opts out, they would also gain a draft pick. This could turn out to be a bargain signing.

Was the good and obvious signing, it's more money and more years (years more than money) than I would personally have liked, but as I've said in the past pre Lester etc, people are underestimating how much money there is around at the moment and the path of player contracts. This is a market rate deal in the current environment and that rate keeps rising. If there's a sudden glut of talent and the supply demand dynamic changes that will change but I'm not holding my breath.
It also comes at no cost bar the money, not even a pick. Which is a perk.

On the opt-out. Anyone arguing for a second that the opt-out is team friendly doesn't understand options. The Red Sox sold an option. As with when you eg buy a call spread, if you are exercised on your short option leg you're actually happy. Because you've made money. But you know what, you'd have made more money if you hadn't sold it.
Of course you might not have been able to make what you made without having sold the option. So it's the price of the deal. Like or hate it it's part of the price paid to get the guy. But any argument it helps the team is stupid.
Yes if he pitches well and opts out it's not the worst thing in the world for the Red Sox, but it means that they will lose a premium talent on a below market deal. That's not going to be good. If he doesn't opt out then the deal was likely a bad one in the first place, so the opt out does nothing to change that.

What the option does is limit the upside of the deal. If Price becomes the best pitcher in baseball you get him for three years, and would you take the best pitcher in baseball on a 3 year deal for 90mm? Yes. You know what's better than having the best pitcher in baseball on a 3y/90mm contract? Having him on a longer contract.

So as I say it's a lot like selling out your maximum upside, the benefit getting him. We don't know what the non opt out deal was. Was it another year another 30mm instead, I'd rather have the opt out. An extra 5 mm over the deal? Closer. We don't know the cost so analysing if it's good or bad vs the contract saving or missing out is very hard.
It is however, a worse deal with the opt out than without. It's maths. It's not a debate. The nice part is though that when it hurts it means you've had good results. So it limits the best scenarios, without worsening the bad scenarios. There are worse kind of options to sell.

E5 Yaz said:

So, if the narrative making the rounds is true, the Red Sox waited on Price while Greinke was was waiting on the Red Sox. Does that mean Boston was Greinke's first choice?

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Possibly, or it could simply have been a case where Greinke knew the Sox were going to be the top bid if they couldn't land Price so he waited to see how that worked out.

He looked strange enough on a Tor uni..

Let's try to summarize this, so we don't have to hear the same arguments again and again...

'I hate the opt-out-clause' position:
- opt-out clause limits the upside of the deal (from the club's perspective) without limiting the downside

'I don't mind the opt-out clause' position:
- regardless of the above upside/downside point, the clause has been recently invoked (e.g. Sabathia, A-Rod) in a way that has actually benefitted the club (or would have benefited the club had they not extended the player) relative to where the club would have been had there been no clause at all

- given Price's age, chances are slim he's going to massively outperform the contract in the back 4 years, so the limited-upside argument is a canard anyway.

Anything important I'm missing here?

m0ckduck said:

Let's try to summarize this, so we don't have to hear the same arguments again and again...

'I hate the opt-out-clause' position:
- opt-out clause limits the upside of the deal (from the club's perspective) without limiting the downside

'I don't mind the opt-out clause' position:
- regardless of the above upside/downside point, the clause has been recently invoked (e.g. Sabathia, A-Rod) in a way that has actually benefitted the club (or would have benefited the club had they not extended the player) relative to where the club would have been had there been no clause at all

- given Price's age, chances are slim he's going to massively outperform the contract in the back 4 years, so the limited-upside argument is a canard anyway.

Anything important I'm missing here?

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London and Ras are correct, and you're missing that there is a whole field dedicated to pricing options (as here and in more complicated finance contexts).
There was a Nobel prize awarded for this. http://www.people.hbs.edu/rmerton/nobellecture.pdf

Here's one quote showing all optouts benefit only the player
https://en.m.wikipedia.org/wiki/Option_time_value

For an American option this [option] value is always greater than zero in a fair market, thus an option is always worth more than its current exercise value.

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---

You should also add to the summary the value of keeping the draft pick, the value of the draft pick they might get when Price exercises the option, and the potential incentive to Price to work hard.

Beyond those potential upsides (external to the value of the opt-out itself), no offense intended but the rest of the debate is mostly semantics. I enjoyed shelterdog's post in the old thread and I think it deserves repeating:
[The implication of pro-team opt out arguments is]
"Teams should look at money as a benefit to them, because when they pay it to players it gets them to sign"

I don't think there is any disputing the argument that the opt out benefits the player. But some of the cost of that benefit is borne... not by the original signing team but rather by the team that signs him after the opt out.

The fan in me wishes they had signed Lester last year instead. Interesting, Price's 2015 season is very similar to Lester's 2014, and their age at the time is about 8 months apart. Their career numbers at the time are also not dramatically detached.

I suspect the willingness for the ownership to open up their wallets this way is in part a response to missing out on Lester a year ago.

Nonetheless, it's nice to see them spend some money on starting pitching.

I prefer having the opt-out in the deal:

1. It should keep Price continually motivated (I don't really think that would be a problem, but it's a benefit nonetheless).
2. An opt-out has become standard with the very top free agents, and I'm certain that not including the opt-out means that the Red Sox don't sign David Price.
3. I hate long term, expensive deals for pitchers, so the idea that it might end after only 3 years is an appealing notion.

There are plenty of scenarios where it doesn't line up, but the bottom line is if Price opts out after 3 years, the Red Sox should be disciplined enough to waive good bye and let someone else pay him for his mid to late 30's. And let's be honest, how many players have had an opt-out and haven't used it (especially if you remove players who were injured)?

Yes, that may mean that the Sox are seeing value walk out the door that they have to replace, but the bottom line is that letting a player walk a year early is going to be a bit painful. It's just a matter of ignoring the short term news cycle and looking at the long term implications. Plus it will make for fun thread in another 3 years.

moondog80 said:

This is like the 78th most important thing here, but with Price and Betts (and JBJ and Young), when was the last time the Sox have had so many prominent black players? Rice and Jenkins and Cecil Cooper/George Scott in 76/77?

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Depending on your definition of "prominent," I'd say the late 1990s. The 1998 team included, at some point or other, Mo Vaughn, Troy O'Leary, Reggie Jefferson, Darren Lewis, Damon Buford, Tom Gordon, Donnie Sadler, and the immortal Keith Mitchell.

OCD SS said:

I prefer having the opt-out in the deal:

1. It should keep Price continually motivated (I don't really think that would be a problem, but it's a benefit nonetheless).
2. An opt-out has become standard with the very top free agents, and I'm certain that not including the opt-out means that the Red Sox don't sign David Price.
3. I hate long term, expensive deals for pitchers, so the idea that it might end after only 3 years is an appealing notion.

There are plenty of scenarios where it doesn't line up, but the bottom line is if Price opts out after 3 years, the Red Sox should be disciplined enough to waive good bye and let someone else pay him for his mid to late 30's. And let's be honest, how many players have had an opt-out and haven't used it (especially if you remove players who were injured)?

Yes, that may mean that the Sox are seeing value walk out the door that they have to replace, but the bottom line is that letting a player walk a year early is going to be a bit painful. It's just a matter of ignoring the short term news cycle and looking at the long term implications. Plus it will make for fun thread in another 3 years.

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Your point 3 reflects a consistent logic blindside in this discussion. In a standard contract, the team always has the option to jettison the player by trading. Op-out is never needed. In a standard 7 year contract, Red Sox can always trade him after 3 years and get something in return if the contract is undervalued at that point, or subsidize if the contract is overpriced. Op-out takes that option away from the team and give it to the player. However in this case, it's reasonable to say the contract in totality is a win for Red Sox, but definitely not because of the single op-out component.

Abs takes a look at the signing this morning on the dot com.

http://sonsofsamhorn.com/baseball/teams/al-east/boston-red-sox/david-price-hes-the-ace/

First of all, if only to try to assure Ras I'm not just some random guy on the internet - I trade options for a living. So I think I have a decent understanding of how they work. Please bear that in mind before abusing me for my ignorance. This is also my first main board post (I think) but I've been here for a decade or so. I just like to give myself time to think things through before I say anything...

Second, the people saying the opt-out only has value to the player are mainly right. If you don't understand why this is, you probably shouldn't be posting about the value of options imo. There are factual arguments being made here, and people are missing/misunderstanding them because of all the noise.

Third, they're only mainly right. Virtually all the arguments put forward to suggest that options have no value to the team are using textbook option theory. If you use textbook option theory in the real world, then I would like to trade options with you. You will not find it pleasant. I'll even lend you my Black-Scholes calculator if you like.

So here's a subtlety. The argument that it's always bad for the team is relying on the possibility that the team could always trade Price after 3 years rather than having him opt out if he has more value than the remainder of his contract. But in the real world Price will not have a fixed knowable value in 3 years time. Different teams will have different opinions of this value based on different information. And here's the subtle point - that perceived value is different depending on what the circumstances are.

If Price opts out and the Red Sox appear to be trying to resign him, his value is high. He has indicated he believes it is more than 4/127 and the Red Sox who have the best information about him appear to agree. Other teams can be somewhat confidence he's worth chasing. His perceived value will be high.

But imagine there was no opt out clause. Now when the Sox announce after 3 years that they're interested in trading him, the first reaction of other teams will probably be "Sweet, David Price is on the block". The second reaction will (or at least should be) "Why the hell would the Sox want to trade him? What's wrong with him?". His perceived value will be low.

So it's completely possible that his market value would be higher than the 4/127 if he had the opt out, but actually not if the Sox were trying to trade him.

OK, it's a subtle point, but it's there. So what you may be asking? Who cares? Well there's a reason you might care. There's no good way to short the market in baseball. If you think someone is undervalued, you try to sign them or trade for them. Great. If you think they're overvalued all you can do is not have them on your team. The player opt out actually offers a way to short the market. So say you believe you'll do well in the first 3 years but don't really want the last 4 years. You also believe the market for mid-30s pitchers is inefficient (I think this is pretty clearly true btw). You know that if you try to trade him after 3 years, the very act of trying to trade him will reduce his value. So you give him the opt out as a way to essentially allow yourselves to trade him without reducing his value.

In this way the opt out can have value to the team.

Now it's unlikely that the value generated like this is particularly large, but it does exist. And we should also note that the value of an option to opt-out of a 4/127 contract at age 33 isn't very large. There's a good chance Price won't perform well enough to justify opting out, and if he does what would you realistically expect to pay for those 4 years? $150m? You're not likely to be crushed by not having Price under that contract in my opinion. A little sad maybe, but especially compared to the pain of other recent contracts, missing out on 33yo Price at 4/127 isn't a big deal.

So it's a little ironic that the we're focusing so much on the value of the opt out, and so little on the fact that the Sox may have paid $30m more for Price than the next best bid (I've only seen that the Cardinals were <$200m at this point, so not sure if the reported $30m is accurate). Because that's probably a more significant issue in the grand scheme of things.

And just to reiterate - my points here are subtle practical rather than theoretical ones - the people saying the opt-out only has value to the player are mainly right

(Sorry it's so long, sorry it's in this thread rather than the opt out one - I posted it here because that's where all the rest of the conversation was)

Savin Hillbilly said:

Depending on your definition of "prominent," I'd say the late 1990s. The 1998 team included, at some point or other, Mo Vaughn, Troy O'Leary, Reggie Jefferson, Darren Lewis, Damon Buford, Tom Gordon, Donnie Sadler, and the immortal Keith Mitchell.

Click to expand...

Good one, I had forgotten about Tom Gordon. Should also mention the '86 team with Rice, Baylor, Oil Can, and Dave Henderson.

Factor in Ortiz, Hanley, Xander, Panda, Rusney, E-Rod, Koji, and Taz, and this is going to be the least white team they've ever had.