Options For Everyone

The business of Baseball transcends the game in many ways. Oftentimes purist fans want to forget about the business side of Baseball as it takes away from the joy of watching America's Pastime the way it was meant to be watched. On the other hand, like in medicine, philanthropy, and other parts of life, Baseball is a business, no matter how much we wish it weren't. While many heads in the clouds hope that one day Baseball will return to just a bunch of boys playing game after game in the summer sun, the business side of Baseball isn't going anywhere. In fact, embracing the money side of the game can enrich one's fandom. Determining the length, dollar amount, and other parts of contracts makes up such a large part of analyzing the game, that some focus solely on such topics. If your looking for a good website for all things business oriented concerning Baseball check out Maury Brown's website http://www.bizofbaseball.com/. For now, I want to discuss the idea of an option. 

Adam LaRoche

Every player's contract has an average annual value, a yearly dollar amount that when combined equals the total value of said player's contract. So, for example, this offseason Adam LaRoche of the Washington Nationals signed a 2-year contract worth $22 million. He will earn $10 million in 2013 and $12 million in 2014. That $22 million counts as his base salary. Options are one-year additions that teams and players' representatives negotiate on when discussing a contract that have a dollar amount associated with them, but are not guaranteed unless the option is "picked up" or the option vests. Options give teams and players flexibility. Sometimes tacking on an option to a contract can make negotiations run more smoothly, other times they can be deal breakers, causing the two sides to forgo a contract and move on. More often than not, options are useful tools for both a player and the team; giving both sides a bit more wiggle room when discussing contracts involving tens of millions of dollars.

A few different types of options exist, including team options, player options, mutual options, and vesting options. I'll give a quick synopsis of each type, using examples to illustrate the positive and negative affects of each. First, let's discuss the team option. Team options, or club options, are the most commonly utilized form of the option. In his book, "The Extra 2%", Jonah Keri mentions club options when discussing ways in which the lowly Tampa Bay Devil Rays, now known only as the Rays, got the most out of the contracts they offered to top tier players. Keri describes it best when he says, "But with a club option, the team wields all the power. Got a 40-home run hitter? Keep him. Did he turn into Mario Mendoza? Happy trails." Team options give a club's front office complete latitude as to whether to keep or release a player. If an option has a dollar amount that a player would not find on the open market due to attrition in productivity then the team will choose to not pick up said option because no team wants to waste money on a player who isn't worth the money he will receive.

James Shields

On the other hand, using the example of the Rays, tacking on multiple team options onto a contract given to a young player could allow a team to keep said player for relatively less money than that player would make on the open market, making such an option very valuable. For example, when the Rays offered James Shields a contract early in his career, they added three player options on to the end of the deal, anticipating that Shields would only get better with time, and thus giving them complete autonomy when making the decision to keep him or not. Veterans who sign contracts during their prime years rarely allow teams to add club options onto their deals, preferring the other types of options instead, but young players who haven't proven their worth yet, or older players who are on the wrong part of the aging curve accept team options because it leaves some possibility that they could continue playing without becoming a free agent. Oftentimes, if a team refuses to give a player a contract without a club option attached, the player's agent will demand that a buyout clause be attached. A buyout clause is a dollar amount that a team must pay the player if said team decides not to pick up the club option, thereby securing the player some money no matter which way the club decides to go.

Derek Jeter

Now that you understand what a team option entails, let's move on to a player option. Player options are simple; they constitute the exact opposite of a club option. If teams place club options on younger or older players' contracts, player options are more often seen on contracts of players in their prime, or franchise players' contracts. Since the team has the money, front offices rarely want to allow a player to decide whether he will play another year after the base years of his contract have expired. It leaves teams with fewer alternatives, making it more difficult for General Managers and their staffs to plan for the future. On the other hand, some players are just worth it. For example, Derek Jeter, the face of the Yankees franchise, a future first-ballot hall of famer, and a consistently productive player even in his late thirties, had a player option attached to the contract he signed with the Yankees in 2010. The foundation of the contract runs through 2013, with a player option worth $8 million for 2014. Jeter's AAV for the base of the contract is about $17.6 million, significantly more than the dollar amount associated with the 2014 player option. Like club options, player options commonly have buyout clauses linked to them. In Jeter's case, the team has a $3 million buyout option they must pay if Jeter declines the player option for 2014. Player options are rarer than club options, but for a player as important to a one club as Jeter is to the Yankees, teams will do whatever is necessary to ensure that player signs a deal with them.

Conceptually, player and club options have little complexity to them. But wait, there's more. Another type of option seen in Baseball is the mutual option. This type of option combines the aspects of a team option and a player option. Essentially, a mutual option is an option that both the player and team must agree to. Wendy Thurm, a former lawyer, and writer for www.fangraphs.com describes the positive and negative aspects of a mutual option best:

"A mutual option is a hedge against volatility in the market for that player in that particular option year. If the player’s value plummets, the team can decline the option and pay the buyout. If the player’s value rises, he can decline the option and seek a better deal as a free agent. If the player’s value is stable, however, then it might be in both parties’ interest to exercise the mutual option."

So, mutual options give both the team and the player the ability to come together and make a decision. This may seem like the most mature option available because it very well may be. Player and club options give control to one side, shutting out the other, but mutual options, like the negotiation of any contract, allow both sides to have a say. For a good example, let's take Adam LaRoche's contract, mentioned above. In LaRoche's deal, the two sides negotiated a mutual option for 2015 worth $15 million, substantially more than the $11 million AAV of the years preceding 2015. This option, like so many others, comes with a buyout clause. If the two sides don't agree to the mutual option, the Nationals must pay LaRoche $2 million in his departure.

Bobby Abreu

So, we've gone through club options, player options, and mutual options. All that's left is the vesting option. Recently the diligent writers at www.mlbtraderumors.com published a piece about vesting options, publishing with it a list of examples in which vesting options were and were not triggered. A vesting option is the same as the other types of options, except that in order to trigger the option, the player must attain some predetermined level of productivity. For example, the Angels gave Bobby Abreu a vesting option for 2012 that would be triggered if Abreu reached at least 433 plate appearances in the 2011 season. If he did not come to the plate 433 times or more the option would be moot, but if he achieved that minimum number of plate appearances he would be an Angel for another season. We see vesting options pop up most often on the contracts of older players or oft-injured players. These conditions cause instability, and a team doesn't want to be "on the hook" for money if a player cannot prove to the team they can perform on the field. For relief pitchers vesting options often involve appearances or games finished, for hitters we see plate appearances used, and for starting pitchers, innings pitched are most commonly used as a barometer. Sometimes vesting options come with clauses that allow a player to decline said option even if the option has vested, but not all incorporate such provisions. 

So, now you know everything and more about contract options in Major League Baseball. Maybe for some fans these topics detract from the fun and childlike innocence attached to the game, but for most, it offers another fascinating aspect to the non-playing side of sports. So much of the analytical revolution in Baseball combines on-field play with off-the-field decisions made by MLB front offices. No matter your preference, I hope you've learned something, so that maybe, the next time you hear he details of a contract, you might understand them a little better. 

Taming the Wild

George Kottaras

Today the Kansas City Royals announced that they had claimed catcher George Kottaras off of waivers. Kottaras isn't a household name, but the move made me look into whether this was a good fit, or whether the Royals had another motive. Kottaras has played at least part-time in the Majors since 2009, playing in a career high 85 games last season. In his limited role, Kottaras has faced mostly right-handed pitching. He bats from the left-side, and has the typical platoon splits of a hitter with tools at the plate, but who has difficulty hitting MLB breaking balls off of lefties. Kottaras began the 2012 season in Milwaukee, but half way through the season, the Brewers traded him to the Oakland Athletics. The Athletics recently participated in a three-way trade that sent Michael Morse to Seattle and John Jaso to Oakland. Jaso's value has been written about extensively, but lost in that deal was Kottaras.

 Kottaras is an average hitter, with a career wOBA of .322. On the other hand, over the last two seasons, as Kottaras has played more games, his OPS+ has been above average, 107 in 2011 and 108 in 2012. He hasn't hit many home runs, but his isolated power split is vast. Kottaras has posted a .209 ISO against right-handed pitching but only a .129 ISO vs. lefties. While this fact isn't dissimilar from many left-handed hitters, a closer look using pitch F/X data shows that Kottaras has an affinity to hit pitches in the upper portion of the strike zone against right-handed pitching for power. In fact, despite the adage that left-handed hitters are good low-ball hitters, Kottaras seems to be a better hitter against balls that are up in the strike zone against both righties and lefties. Overall, Kottaras looks like a hitter who is beginning to figure some things out at the plate. He is able to get on base against both righties and lefties, but shows impressive power numbers against only righties. This combination is enough to get him a back-up catching job, but I think something else caused the Royals to snag the former Athletic off of waivers.

Kottaras isn't a great defensive catcher, posting a slightly negative defensive rating according to Fangraphs in 2012. In fact, he has never posting a positive defensive rating. Fangraphs calculates their defensive for catchers based on two major statistics, rSB and RPP, with rSB accounting for a catcher's need to throw out base runners well and RPP accounting for a catcher's ability to block balls in the dirt. Teams that have pitchers who don't have good pick-off moves or are slow to the plate need catchers with good rSB's in order to counteract their pitchers' deficiencies. If a team's pitching staff has pitchers with erratic control and propensities for throwing breaking balls with lots of movement, said team would want a catcher with good RPP numbers. While Kottaras hasn't posted very good rSB numbers, his RPP numbers have been positive since 2010. In fact, since 2010, Kottaras ranks 13th amongst all MLB catchers in RPP, ahead of names like Jonathan Lucroy, John Buck, and Kurt Suzuki, and just behind Ivan Rodriguez, Buster Posey, and Jason Kendall. Given these numbers, a team whose pitchers have a proclivity for being wild would benefit far more from Kottaras's services as opposed to a pitching staff with pinpoint control.

Given Kottaras' talents for blocking balls in the dirt, it stands to reason that the Brewers wouldn't want to let him leave, especially since the Brewers' pitching staff was 9th in the league in wild pitches in 2012 and 3rd in the league in wild pitches since 2010. On the other hand, in 2012, both other catchers on the Brewers' roster, Jonathan Lucroy and Martin Maldonado also posted positive RPP's, making Kottaras expendable, but not worthless. In fact, it's that value that the Kansas City Royals may have picked up on. This offseason, the Royals made a significant trade, acquiring Wade Davis and James Shields from the Rays in exchange for a dynamic package of prospects. Both Davis and Shields will make immediate impacts, Shields as their ace pitcher, and Davis as either a back of the rotation starter or right-handed reliever out of the pen. In addition, the Royals also added righty Ervin Santana to their rotation. Santana is a strikeout pitcher with a hard fastball and knee-buckling slider that often ends up in the dirt. Shields and Santana both ranked in the 21 pitchers in the Majors since 2010 in wild pitches, and since 2008 Shields, Santana, and fellow Royals pitcher Luke Hochevar have ranked in the top 30 in wild pitches. Overall, it seems as the Royals would disproportionately benefit from a catcher who is above average at blocking balls in the dirt, especially since if Kansas City is going to make the playoffs for the first time since 1985 every positive addition, no matter how small, will make a difference.

Salvador Perez

Kansas City now has a dynamic duo of backstops, with both Kottaras and young stud Salvador Perez on the roster. Perez is the better hitter of the two, and has better overall defensive numbers. In fact, Perez excels defensively in areas at which Kottaras is lacking, and visa versa. Perez has a very strong arm, and very good mechanics behind the plate, but is just below average in blocking balls in the dirt. Since overall defensive ratings for catchers weight throwing out base runners as more important than blocking balls in the dirt, Perez looks like the better of the two, but by adding Kottaras into the mix, it gives the Royals affordable and talented defense behind the plate. Kottaras also adds some more veteran experience, a left-handed bat with good power, and allows the Royals not to stress Perez too much without giving up too much production. Look to see Kottaras play predominantly against right-handed pitching, but more importantly, look for him to catch when James Shields and Ervin Santana take the mound. I'm in no way saying that it is absolute, especially given that Salvador Perez's RPP numbers aren't awful, and given his age, there is the possibility that his RPP numbers can improve. For the time being, the Royals see Kottaras' skills as solid value added, especially since his 2013 salary is only $1 million and he isn't a free agent until the 2016 season.

Don't overlook signings or pickups like this one. Numerous other teams could have benefited from even 80 games worth of George Kottaras. One specific team that comes to mind is the Chicago White Sox. White Sox pitchers have thrown the 3rd most wild pitches in the Majors since 2010, and the team recently lost veteran catcher A.J. Pierzynski to free agency. Moreover, given Pierzynski's absence, the team is considering using youngster Tyler Flowers as their dominant catcher in 2013. Adding a more veteran left-handed hitting catcher who can handle erratic pitching would seem prudent. The White Sox play in the same division as the Royals, the Sox finished one spot ahead of KC in 2012, and they haven't undergone nearly as many positive renovations to their roster as the Royals have done. So, picking up Kottaras not only benefits the Royals directly, but also indirectly benefits them by not allowing the White Sox to pick him up. Who's to say the Sox would have picked up Kottaras, but he does fit their team incredibly well. Look for pitchers like James Shields and Ervin Santana to have slightly better strikeout numbers than they did in 2012. Some of that will be due to moving to a less talented division, but some may also come from their ability to throw any pitcher to get a hitter out without worrying that the ball may get away from their catcher. While trading for Shields and Santana were sexier and more productive moves, both come with risks, which the Royals are lessening by adding Kottaras to the mix. It's possible that the Royals will make the playoffs for the first time since the 1980's in 2013, but the odds are against them, so it's a good thing that George Kottaras, the forgotten catcher, now dons a royal and white uniform.