Option Contract Earned $62.5 Million can be Applied in your MLB Contract Too

option-contract

An option contract for MLB players needs to optimize power.  No, not bat power or throwing velocity, but the power you, the player has to negotiate and earn the highest possible wage.

Here is a recent publicized example I believe you can use as an inspiring example.

Cespedes’ Option Contract in 2016

In case you have not heard,  Yoenis Cespedes signed a recent agreement that you need to scrutinize for yourself.

No, it doesn’t matter whether you play the same position or have different playing styles.  Instead, I challenge you to seek and acquire your own option that might go something like this.

Entering into the 2016 season, Cespedes (age 30) signed a 3 year contract valued at $75 million:

2016 (Year 1) = $10 million signing bonus + $17.5 million for season  [$27.5 million]
2017 (Year 2) = $23.75 million
2018 (Year 3) = $23.75 million

If this is all you are shooting for, then no need to read on.  On the other hand, if you see yourself excelling at a higher level than right now, consider Cespedes’ for the year 2017 .

Cespedes’ New Contract in 2017

Entering into the 2017 season, Cespedes (age 31) signed a 4 year contract valued at $110 million:

2017 (Year 1) = $27.5 million
2018 (Year 2) = $27.5 million
2019 (Year 3) = $27.5 million
2020 (Year 4) = $27.5 million

This means Cespedes agreed to play two more seasons and acquired an additional $62.5 million in wages.

How did Cespedes get a New Contract?

Yes, you can negotiate this too!  In 2016, Cespedes negotiated a “player’s option” that contractually granted him the right to void his contract at the conclusion of year 1 or the 2016 season.

I call a MLB player option contract an “optimal option” because it gives a player significant leverage and freedom. Assuming all of the conditions of the option are satisfied, ideally a player’s option gives him the right to void his contract at HIS DISCRETION.

What made Cespedes’ option extraordinary is the idea that he was granted an optimal option after the first year of his contract versus the second to the last year of his contract.

Optimal Option Contract for Cespedes

Here is one reason Cespedes’ new contract might be argued as being an optimal option: he added $62.5  million dollars ($3.75 + 3.75 + 27.5 + 27.5 million) and two more years of playing for his Club onto his first contract.

On the other hand, here are a few reasons Cespedes’ new contract might be argued as a bad decision if you believe he:

  • Cespedes should have waited until a new collective bargaining agreement was formalized,
  • Should not accept earning 15% less than the value of Giancarlo Stanton’s expected contract value at the age of 33 and 34,
  • Cespedes should have sought a contract that does not make hime a free agent at 34 years of age, or
  • Cespedes’ wages in New York will be taxed double (if not higher) had he signed a contract with a Club that was domiciled in a State with a considerably lower income tax.

Opposite of an Optimal Option Contract

Our story would not be complete without identifying the opposite of a player’s option contract.

The opposite of a player’s option is granting your Club an option.  A club option means your Club has the power to void or extend your contract at their discretion.

For all kinds of reasons, I do not like the idea of granting a club an option on your career.  Likely, you can come to this same conclusion.  However, we can talk about this issue at a later time.

Illusionary Option Contracts

Before you start jumping out of your seat in excitement, please remember that option contracts are tricky when layered with condition after condition.

In other words, if I sign a baseball contract and it is impossible for me to meet all 5-10 conditions, then really…the option contract is not much of an option.  Instead, I call this an illusionary option.

Negotiating an optimal option is the first step and reducing the number of conditions is the second step.  With that, I hope your offseason is going great and you can use this outline to your advantage.