Giancarlo Stanton’s Opt-Out Caps His Trade Value

The better Stanton performs over the next few years, the more likely he is to opt out. (Photo: Corn Farmer)

With the Marlins looking to cut payroll, Giancarlo Stanton seems likely to be traded at some point this winter. Stanton not only takes up a lot of that payroll, but his talents are desirable to other teams. The grounds for a trade are obvious. At the same time, the 10 years and $295 million remaining on his contract present a roadblock to acquiring him. So does his no-trade clause, which he could use to block a trade to one of the clubs willing to take on his salary.

Another concern is Stanton’s opt-out clause. While less of an obstacle to the eventual completion of a deal, it’s a factor. By the terms of the opt-out, Stanton will have the choice, in three years, either to become a free agent, or exercise a player option for seven years and $218 million. In late June, when Stanton had a 131 wRC+ and looked to be on pace for “only” a four-win season, the opt-out didn’t seem to matter too much; the probability that he’d exercise it seemed pretty low. A monster second half and MVP Award later, though, and that opt-out is back in play, and it negatively affects Stanton’s value.

Without revisiting whether player opt-outs benefit a team (Dave Cameron wrote about it over the course of multiple posts two years ago with the last one here), let’s just dig into the numbers a bit and see what they say. Last week, Eno Sarris advocated for trading for Stanton, noting that if Stanton ages normally, there’s a big surplus on the contract. Sarris also noted that, even if Stanton ages poorly, the contract would remain pretty close to the current market rate.

Here’s an estimate of Stanton’s value were he to age normally, starting with $9 million a win. I’ve used Steamer’s win projection (5.3 WAR) for Stanton’s 2018 season.

Giancarlo Stanton’s Contract — 10 yr / $295.0 M
Year Age WAR $/WAR Est. Contract Actual Contract
2018 28 5.3 $9.0 M $47.7 M $25.0 M
2019 29 5.3 $9.5 M $50.1 M $26.0 M
2020 30 5.3 $9.9 M $52.6 M $26.0 M
2021 31 4.8 $10.4 M $50.0 M $29.0 M
2022 32 4.3 $10.9 M $47.0 M $29.0 M
2023 33 3.8 $10.9 M $41.6 M $32.0 M
2024 34 3.3 $10.9 M $36.1 M $32.0 M
2025 35 2.8 $10.9 M $30.6 M $32.0 M
2026 36 2.3 $10.9 M $25.2 M $29.0 M
2027 37 1.8 $10.9 M $19.7 M $35.0 M
Totals 39.0 $400.6 M $295.0 M


Value: $9M/WAR with 5.0% inflation (for first 5 years)
Aging Curve: +0.25 WAR/yr (18-24), 0 WAR/yr (25-30),-0.5 WAR/yr (31-37),-0.75 WAR/yr (> 37)

As structured, the deal looks pretty good for the team, with a surplus of over $100 million. Except for one thing, though: this version of reality isn’t ever likely to occur. In three years, Stanton will be just one year older than J.D. Martinez is right now. If he puts up three five-win seasons in a row — better than what Martinez just did in one season — his value on the free-agent market is going to exceed the $218 million he is owed. In that case, Stanton would almost certainly opt out, cutting the surplus by 30%.

The above case represents just one scenario, though. To play this out, let’s consider a bunch more and see where it leads. For the purposes of this exercise, let’s assume the 5.3 WAR figure is a good estimate of Stanton’s present talent. Note that the higher estimate you put on his talents, the more likely Stanton is to opt out. If you put a six-win talent estimate on Stanton and give him 18 WAR over the next three seasons, that place among the greats. The only primary right fielders to do better than that from 28 to 30 since 1947 are Hank Aaron, Stan Musial, and Frank Robinson. Even in that scenario, the surplus is under $100 million. There’s a limit on how much high-end value Stanton can provide because of that opt-out.

To examine the consequences of the opt-out, we need to consider a wide range of outcomes. Here, I’ll consider scenarios in which Stanton (a) ages well, (b) ages normally, or (c) Stanton ages poorly. I’ll also consider the varying outcomes regarding Stanton’s current talent level, setting 5.3 WAR as the average outcome.

For the first exercise, we will consider Stanton’s value if he ages normally. Here are some possibilities of his current talent level and a rough estimate of the likelihood of those outcomes.

Giancarlo Stanton Potential Outcomes in 2017
Percentile Outcome WAR Percent Chance of Outcome
90% 8.8 4%
80% 7.6 8%
70% 6.6 12%
60% 5.8 16%
50% 5.3 20%
40% 4.8 16%
30% 4.1 12%
20% 3.1 8%
10% 1.9 4%

We will use this same distribution throughout. As you can see, there’s a 52% chance that Stanton’s talent level is somewhere between 4.8 and 5.8 WAR, with the higher and lower estimates occurring less frequently. What we will now do is put all of those scenarios through the calculator, determine if Stanton would opt out, and find a surplus value that we will weight by the percentage chance of that outcome.

The first step looks like this.

Giancarlo Stanton Potential Outcomes in 2017
Percentile Outcome WAR Percent Chance of Outcome Value Before Opt Out ($/M) Salary Before Opt Out ($/M) Salary After Opt Out ($/M) Value After Opt Out ($/M) Opt Out
90% 8.8 4% 249.7 77 218 516.4 Y
80% 7.6 8% 215.6 77 218 425.2 Y
70% 6.6 12% 187.3 77 218 349 Y
60% 5.8 16% 164.6 77 218 288.2 Y
50% 5.3 20% 150.4 77 218 250.2 Y
40% 4.8 16% 136.2 77 218 212.2 N
30% 4.1 12% 116.3 77 218 159.0 N
20% 3.1 8% 88.0 77 218 87.7 N
10% 1.9 4% 53.9 77 218 30.8 N

If Stanton’s value after the opt-out is greater than his salary, then he opts out. In the above scenario, Stanton would opt out around 60% of the time.

Now let’s look at the surplus value that Stanton provides in these scenarios, beginning with a normal aging curve.

Giancarlo Stanton Surplus Aging Normally
Percentile Outcome WAR Percent Chance of Outcome Surplus with Opt-Out Clause Value of Surplus Value of Surplus with no Opt-Out Clause
90% 8.8 4% 172.7 6.908 18.844
80% 7.6 8% 138.6 13.816 27.664
70% 6.6 12% 110.3 13.236 28.956
60% 5.8 16% 87.6 14.016 25.248
50% 5.3 20% 73.4 14.68 21.12
40% 4.8 16% 53.4 8.544 8.544
30% 4.1 12% -19.7 -2.364 -2.364
20% 3.1 8% -119.3 -9.544 -9.544
10% 1.9 4% -210.3 -8.412 -8.412
TOTAL $50.9 M $110.1 M

In the best scenarios for Stanton, he opts out of the contract after three years, giving a team surplus value only for the first three years. That cuts the surplus from the $100-plus million like we saw in the first chart down to $50 million.

Now let’s repeat the process above — except, this time, we’ll assume that Stanton ages well. The opt-out situation does not change at all here, as he is presumed to hold steady from ages 28 to 30 before the opt-out anyway.

Giancarlo Stanton Surplus Aging Well
Percentile Outcome WAR Percent Chance of Outcome Surplus with Opt-Out Clause Value of Surplus Value of Surplus with no Opt-Out Clause
90% 8.8 4% 172.7 6.908 21.9
80% 7.6 8% 138.6 13.816 33.776
70% 6.6 12% 110.3 13.236 38.136
60% 5.8 16% 87.6 14.016 37.472
50% 5.3 20% 73.4 14.68 36.4
40% 4.8 16% 129.8 20.768 20.768
30% 4.1 12% 56.7 6.804 6.804
20% 3.1 8% -47.7 -3.816 -3.816
10% 1.9 4% -173 -6.92 -6.92
TOTAL $79.5 M $184.5 M

If Stanton ages well, the surplus goes up to $80 million, but the opt-out costs the team more than $100 million because of the lost value.

Now let’s take a look at what happens if Stanton ages poorly. If that were to occur, he’d start to show his age a little bit at age 30 and the opt-out situation changes. He only opts out below at the 70th percentile outcome or higher, which happens 24% of the time.

Giancarlo Stanton Surplus Aging Poorly
Percentile Outcome WAR Percent Chance of Outcome Surplus with Opt-Out Clause Value of Surplus Value of Surplus with no Opt-Out Clause
90% 8.8 4% 165.4 6.616 13.972
80% 7.6 8% 131.3 13.232 17.92
70% 6.6 12% 102.9 12.348 14.34
60% 5.8 16% 36 5.76 5.76
50% 5.3 20% -10.8 -2.16 -2.16
40% 4.8 16% -54.9 -8.784 -8.784
30% 4.1 12% -110.5 -13.26 -13.26
20% 3.1 8% -177.2 -14.176 -14.176
10% 1.9 4% -238.6 -9.544 -9.544
TOTAL -$10.0 M $4.1 M

We see that, if Stanton ages poorly, teams no longer get the value of the contract due to the opt-out. Without the opt-out clause, the contract still has surplus value, but the opt-out drops the value by around $15 million.

Now, we can’t just average the three scenarios to arrive at an estimated “cost” of the opt-out, because the likelihood of each scenario isn’t the same. We could come up with a number of different scenarios to find a value for the opt-out, but how about we assume that Stanton’s current contract is roughly market value and come up with a scenario to see how front offices might be viewing Stanton’s potential as he ages.

For these purposes, we will say Stanton ages well 5% of the time, ages normally 15% of the time, and ages poorly 80% of the time. To find your own valuation of Stanton, you can choose different figures. If you think Stanton is more likely to age normally, you are going to rate Stanton as a much more valuable player.

The scenario here is a rough approximation of his valuation if his current contract is market value.

Giancarlo Stanton Value of Opt-Out Clause
Contract Status Surplus
With an Opt-Out Clause $3.6 M
Without an Opt-out Clause $29.1 M
Difference $25.5 M
Assumptions: Ages Well 5%, Ages Normally 15%, Ages Poorly 80%

If Giancarlo Stanton is a 5.3 WAR player right now and his contract is market value, that opt-out is worth around $25 million. Continuing with these assumptions, Stanton opts out 31% of the time, which seems a bit more reasonable than the 60% under the “ages well” and “ages normally” scenarios. If Stanton doesn’t opt-out, just 31% of the time does the team get value on the contract. As we might expect on a contract that has an expected value in line with the terms, it is pretty close to a 50/50 split on whether it works out for the team.

Most of the time, Stanton does not opt out, and in the vast majority of those circumstances, the team doesn’t get full value from Stanton. When Stanton does opt out, the team misses out on a good chunk of value. The better you believe Stanton is now and will be in the future, the more a team misses out with that opt-out clause. We often assume that the team with the highest valuation of a player will make the best offer, but in this case, a high valuation is going to put a cap on the value a team believes it will receive due to the opt-out clause. That clause limits the ceiling a team will receive from Stanton while retaining the risk that comes with a $295 million contract.

Craig Edwards can be found on twitter @craigjedwards.

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6 years ago

The likelihood distribution on your current WAR projections seems pretty reasonable, but what’s the explanation for the aging assumptions? Why is there an 80% chance he ages poorly, and only a 5% chance he ages well?

6 years ago
Reply to  Craig Edwards

Fair enough. But teams’ valuation of him could also mean they have a lower estimate of his current talent projection.

In any case, I love that you took the time to do this kind of analysis. It’s what we should think about in terms of any transactional analysis. Not just a chart with a year-by-year WAR projection (which we’ve seen on Fangraphs a thousand times), but also considering the likelihood of a range of different projections and different aging curves.

6 years ago
Reply to  Craig Edwards

I like how you use the idea his contract is close to market value to assign probabilities.
As Yirmiyahu said, it might mean that teams have a lower estimate of Stanton’s current talent.
However, 5.3 WAR seems reasonable enough to me.
I strongly suspect that it is $/WAR figure that is off.
If $9M/WAR is the true current market price, then there is no reason that the Reds would not offer Cozart QO because Cozart would never take it.

6 years ago
Reply to  tung_twista

You’re right, $9M per WAR is suspect. It’s more like $11M.

Also, you should pretty much never use decisions made by the Reds front office as evidence of how the baseball market as a whole operates.

6 years ago
Reply to  bmarkham

So according to this figure,
Mets expected 10.5 WAR from Cespedes for four years
Cards expected 7.9 WAR from Fowler for five years
Rockies expected 6.7 WAR from Desmond for five years
Dodgers expected 6.1 WAR from Turner for four years
Indians expected 5.7 WAR from Encarnacion for three years
Astros expected 5.0 WAR from Reddick for four years.

I will take over on all of them.

There is a massive difference between what the teams have been paying per WAR in the past and what the team is willing to pay per WAR in the future.

As great as Trout is, I doubt any team would go remotely close to paying $78M AAV for current Trout (using 8.7 steamer projection and $9M /war) let alone $98M AAV using $11M.

6 years ago
Reply to  tung_twista

That is a bunch of words that does nothing to invalidate the results of the study I linked to, which is based on what teams actually paid, the actual performance of the players, and the average annual inflation of the ratio between the two. You could learn a lot if you actually read it.

Trout’s contract wouldn’t approach a $78M AAV because he would be given a long-term contract that he would be expected to decline during. He would get something like a $40M AAV which would be a surplus at the beginning of the contract and a deficit on the back end. He’d probably also have an opt-out or three, which is extra value that doesn’t show up in the AAV.

The reason you’re so high on the WAR estimates for the players above is also because you’re failing to factor in expected decline (except for Turner, that was just a steal). It’s also because I said it was around $11M this year, last year it was more like $10M (and again, that’s simply a fact based on the production of all players who started the year with over 6 years service time, as well as all of their respective salaries).

6 years ago
Reply to  bmarkham

1. I was using $10M for last year’s analysis
2. I am not saying ‘I’ expected more than 10.5 war at the signing. I am saying that the Mets were surely higher on Cespedes than 10.5 war when they signed him.

Using Trout’s next year projection of 8.7 war and a harsh decline of -0.5 war every year starting next year when he is only 26, do you know how long a contract has to be to get the AAV all the way down to 40M if we were to use $9M/war and inflation of 5% for the first 5 years and zero afterwards?

20 years.
It covers 2018 (age 26) to 2037 (age 45) where Trout is expected to produce 79 War and the estimated contract price is $823M for 20 years with AAV 41M.

Do you think this comes remotely close to what Trout would receive if he were to be a FA this winter?

6 years ago
Reply to  tung_twista

No, I don’t think he would get 20 years. He’d just get a much higher AAV. This still does nothing to refute the objective facts spelled out in the link I provided. You can argue until you’re blue in the face, the math doesn’t care.

6 years ago
Reply to  bmarkham

bmarkham, I think tung twista is on to someting here. I’ve been thinking about this in the context of the Eric Hosmer contract thing and I think the $10 million/WAR figure is being thrown around too easily. This doesn’t mean that Swartz’s findings are wrong (they are likely correct, technically speaking) but that we do not interpret the findings correctly when discussing that figure.

1) Part of the problem is that there are some really influential outliers in the history of free agent pricing. Swartz actually mentions this in one of the later articles in this series, how there are deals signed 10 years ago that no longer look bad because deals for Pujols, Hamilton, etc have reset the actual value of $/WAR. This should be a huge red flag. In these analyses, Jason Heyward and Robinson Cano are part of the $/WAR figure for several years because they are 3 year averages.
This, by the way, does not actually refute any of Swartz’s analysis. It just means that the expectation of what a team is going to get is not likely what this figure is capturing.

2) Swartz also notes that this is not a classic supply-and-demand labor market. The amount of money teams spend appears to be driven by league revenue, while player performance appears to be driven by really good players signing extensions early and no longer being part of the market. So there is a scarcity of talent, and a rising price tag, but the two do not appear to be related to each other.

This whole thing suggests that tung twista is right to be skeptical of the $/WAR figure. Swartz is probably right, but we are probably wrong for how we interpret his work. Many teams are probably not interpreting $10 million/WAR as a good deal, and neither should we. In fact, the results of the study suggest that finding good value in the free agent market is harder than ever, since teams are throwing more money at an increasingly shrinking talent pool. In the context of spending your money elsewhere (on extensions, for example) it looks like the argument isn’t that teams should be spend more money per win on the free agent market, but that teams should spend less overall in the FA market and more elsewhere.

The better way to analyze $/WAR is that salaries are determined through a process of normative comparison. This is something sociologists have started looking into with CEO pay. Here, CEO salaries appear to be totally disconnected from any objective real-world information about “value” and instead are determined by comparing salaries to previous salaries. And that is what we see at the top of the free agent market here too, right? Agents and teams negotiate based on benchmarks about what other contracts have received (if Jordan Zimmerman got this, then this is what Jake Arrieta deserves).

so yeah, bmarkham is right that Swartz’s math doesn’t lie, but tung twista is absolutely right to say something is off about how we’re using that figure.

6 years ago
Reply to  sadtrombone

The value of a point of WAR is not predictive, it is based on the previous season’s production and subsequent AAV of the contracts signed by the free agents.
The outliers don’t establish the value of a point of WAR. The cumulative production and cumulative AAV dollar value of the contracts signed established the value of a point of WAR.
A free agent player that produced a negative WAR the previous season does not owe his new team money. The free agent that produced a 7.6 WAR will not sign for $68.4 million just because a point of WAR had a $9 million value for 2017.
What a point of WAR does do is establish the surplus value of a player’s contract. In the article above, the “market value” of the player’s contract is based on what a point of WAR is worth in each season of his contract vs how much he is paid that season of his contract.
If Stanton puts up a 5.3 WAR for the next 3 seasons, a figure suggested above, and is paid $77 million for those 3 seasons, then Stanton has produced $143.1 million in value based on $9 million per WAR. He has produced a market value of nearly double his salary paid. Since the value of a point of WAR is subject to salary inflation, it is realistic to say that he would have produced a market value of more than double his salary.

6 years ago
Reply to  tung_twista

If you go by the formula here and are NOT generous with when he turns 31 I still end up with 106 WAR instead of your 79 WAR. And a total contract of 1.13 Billion averaging 56.5 million a year. It would take until he is 53 before he would average 40 million a year.

Trout breaks the formula by a very wide margin.

Dave T
6 years ago
Reply to  tung_twista

Good comment, but I strongly suspect that the big difference is in assumptions on aging curve / injury risk.

I’d be curious if anyone has ever calculated aging curves specific to players who are already at a high level (something like at or above 4-5 WAR). By definition, that excludes some players who had an unexpected leap in production in their late 20’s – e.g, Justin Turner or J.D. Martinez – who are part of the average aging curve. There’s also the basic definitional math that a player who misses time due to injury compiles zero WAR during his absence whether he’s a 5 WAR player or a 2 WAR player. Since I’m pretty sure that part of the aging curve is that older players on average miss more time due to injuries, that component of the aging curve ought to be different for players with different WAR forecasts when healthy.

In the case of Stanton specifically, I think that teams must have concerns about a player with his history of missed time. A couple of those absences were due to hit by pitches, specifically the last 15 or so games of 2014 and a bit over half of the 2015 season. That still leaves, however, playing 123 games of less in each of 2012, 2013, and 2016 due to various other injuries (hamstring, knee, groin, side, shoulder, foot). I think that the lower body injuries in particular are something of a red flag for a team projecting the future health of a 6’6″, 245 pound slugger in his late 20’s.