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David Price and Opting Out of Contracts

While the eye-popping numbers in the reported David Price contract with the Red Sox will garner most of the attention, Price’s apparent ability to opt out of the contract following the 2018 season continues a rise in “opt outs” being added to free agent contracts.

While it’s true that these clauses only go to superstars of the game who are able to negotiate them into their contracts, they give those players the potential to earn even more in the future than their existing contracts allow by having the leverage to negotiate a new contract. Additionally, they put teams in a situation in which they need to fork over even more guaranteed money than already promised.

Of course, while there isn’t an example in recent memory of a team being “saved” by a player opt out clause, it’s certainly possible that the Red Sox could find themselves in a situation in which they are glad to see David Price walk away.  It would take a number of circumstances all taking place at the same time, but it’s not completely far-fetched.  It would take David Price putting together three solid seasons (especially a quality season in 2018) that would lead him to believe he could get more guaranteed money than the $127 million he would still reportedly be owed over the next 4 years. Additionally, it would take the Red Sox feeling comfortable with letting Price go at that point and not wanting to guarantee Price more money over more years.

This could happen for a variety of reasons. Perhaps the Red Sox would avoid paying a luxury tax penalty by letting Price walk away.  It’s also possible that the Red Sox would have cheaper and younger major league-ready talent waiting in the wings to replace Price. Furthermore, even if Price posts three above average seasons, they could feel Price would not be able to replicate those seasons over the next 5-6 seasons.

Even so, the list of players who have opted out of their contracts in recent memory is short but has always benefitted the player. Two examples come to mind:

Alex Rodriguez

  • Opted out following the 2007 season
  • Left $81 million remaining on contract over three years
  • Signed new contract for $275 million over ten years
  • Earned $194 additional million

Rodriguez’s famous pre-empting of the 2007 World Series to announce opting out of his contract was widely panned, but regardless of the timing it was a wise financial decision.  Despite Rodriguez’s helping the Yankees win the 2009 World Series, there is likely no bigger regret from the Yankees than their decision to resign Rodriguez to (another) ten year contract starting in 2008, especially when Rodriguez’s (first) steroids scandal emerged before the 2009 season. Note that the money above does not exclude salary forfeited when Rodriguez was suspended for the 2014 season.

C.C. Sabathia

  • Opted out following the 2011 season
  • Left $92 million remaining on contract over four years
  • Signed new contract for $122 million over five years (plus a vesting option)
  • Earned $30 million additional plus vesting option

This is another one the Yankees would like to have back.  Though the Yankees have reached the playoffs in 2012 and 2015 after resigning Rodriguez, they missed the playoffs with him in 2013 and 2014, and he was left off the postseason roster in 2015 after checking himself into rehab (the Yankees didn’t make it past the Wild Card game anyway).  They would have loved for Sabathia to now be off the books as he would have been originally without the opt out clause, but instead they’re on the hook for at least one more season.

In addition to Rodriguez and Sabathia, there are other players who either have or could opt out in the next few years:

Zack Greinke

  • Opted out following the 2015 season
  • Left $71 million remaining on contract over three years
  • Currently a free agent

Greinke could very well sign another contract in the neighborhood of $150 million (perhaps more), making his opt out clause in his previous contract that was signed following the 2012 season extremely valuable.

Masahiro Tanaka

  • Could opt out following the 2017 season
  • Would leave $67 million remaining on contract over three years

Due to injuries and not quite living up to admittedly lofty expectations, Tanaka would likely need to post two seasons better than his first two seasons with the Yankees in order to feel comfortable walking away from his current contract.  At the same time, Tanaka could take a calculated risk if he felt the Yankees were in a position in which they felt they had to overpay to keep him, depending on the shape of the rest of the team’s starting rotation.

Elvis Andrus

  • Could opt out following the 2018 or 2019 seasons
  • Would leave $73 million remaining on contract over five years (or $58 million over four years if he opts out after 2019)

Though Andrus’ annual salaries are more reasonable than most of the other players on this list, his skill set of speed and defense will likely not age particularly well, and unless he improves his offensive numbers, which have stayed fairly consistent over seven years, it would likely be prudent for him to play out the existing years on his contract.

Giancarlo Stanton

  • Could opt out following the 2020 season
  • Would leave $233 million on contract over seven years (plus 2028 club option with $10 million buyout)

Stanton’s contract situation is perhaps the most interesting on this list.  The contract is structured so that it’s heavily backloaded and the Marlins almost seem to be daring Stanton to opt out in 2020.  His ability to sign a contract for more than $233 million in five years will depend heavily on how often he can stay on the field through 2020, as he’s never appeared in more than 150 games in a season.

Clayton Kershaw

  • Could opt out following 2018 season
  • Would leave $55 million on contract over two years

As of right now Kershaw looks like the most likely player on this list to opt out, as he’d be leaving “only” $55 million on the table and is showing absolutely no signs of slowing down.  Additionally, the Dodgers would be hard pressed to not resign their marquee player unless he is performing at a level significantly lower than what he is right now.

Hyun-Jin Ryu

  • Could opt out after 2017 season IF he pitches 750 innings from 2013 to 2017 (has 344 innings pitched through 2015)
  • Would leave $14 million on contract over two years

Ryu will nearly certainly not be eligible to opt out of his contract, having missed the entire 2015 season and needing to pitch an average of 203 innings in both 2016 and 2017 to have the option of opting out.

James Shields

  • Could opt out after 2016 season
  • Would leave $42 million on contract over two years (plus 2019 club option with $2 million buyout)

Upon signing his contract before the 2015 season Shields seemed like a prime candidate to opt out following 2016 (especially given he’d be pitching in PetCo Park).  Instead, Shields posted a disappointing campaign in 2016 and now seems like a borderline case.  He’ll need a quality 2016 performance, ideally one that involves a strong postseason performance (which seems unlikely in San Diego).

All above information was taken from Cot’s Baseball Contracts at Baseball Prospectus and may not include all players with the option of opting out of their contracts.

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