A Simple Method for Evaluating Team Options

Every time a young star signs a contract extension, we all breathlessly mention the total guarantee. Did you hear Corbin Carroll is getting one hundred and ten million dollars? You could buy a pretty nice house with that, or several nice houses, or live comfortably for the rest of your life and set your kids up to succeed in the bargain. It’s natural to focus on something like that. It is, after all, the main part of the deal.
In almost every one of these extensions, there’s an additional feature: one or more years of team options tacked on to the end of the contract. Our collective analytical view of those tends to be more or less a shrug. “Oh, yeah, and two team options, so that’s nice,” we say, or “well, that makes sense.” I wouldn’t call our evaluations of these options particularly nuanced.
I don’t think that’s going to change on the whole, but the Carroll extension spurred me to at least delve a little deeper into the dollars and cents side of those team options. I’ve already done some work on opt outs from the player perspective, and conveniently enough, I can lift a lot of the mathematical methods from that treatment and use them to evaluate things from the team side. Read the rest of this entry »