The Nolan Arenado Trade Problem
There have been rumors for much of the offseason that Nolan Arenado might be on the move. Jon Morosi stirred up a ruckus with a pair of reports that the Cardinals were “emerging” in trade talks and that names had been exchanged. As Ben Clemens noted earlier today, the Cardinals do make some sense as a trading partner because Arenado would be a significant upgrade over Matt Carpenter. Arenado would add an immediate three-win upgrade in what should be a very competitive NL Central. The problem with trading for Arenado is not Arenado the player. Any team would be happy to have his steady five-to-six-win performance. The problem with trying to trade for Nolan Arenado is his contract, and it’s not the $234 million owed to him, either. The opt-out after 2021 is a trade-killer.
It shouldn’t come as a surprise that Jeff Passan was throwing water on Cardinals-Rockies trade rumors:
Quick Nolan Arenado update in yes-and-no form, per sources:
– Yes, the Rockies and Cardinals are talking.
– No, the talks haven't gone anywhere.
– No, the exchange of names has not been productive.
– Yes, it's still considered a long shot that Arenado is dealt in the short-term.— Jeff Passan (@JeffPassan) January 14, 2020
Derrick Goold wrote up a summary of the Arenado activity as well as the Cardinals’ perspective and described the problem as such:
What else is known is how the Cardinals and other teams see Arenado discussions as a Gordian Knot. One source has described them often as “hurdles” to the deal. Arenado has the no-trade clause, and he has the opt-out after the 2021 season. And that’s before a team has to consider the asking price and whether Colorado wants a return on the potential years of control (through 2026) or actual with opt-out (2021). The Rockies are going to want the former; the interested team the latter.
For the sake of argument, let’s assume the no-trade clause isn’t an issue. Let’s next move to the dollars owed to Arenado and ignore the opt-out for a moment. Arenado is owed $234 million over the next seven years. He’s a projected five-win player, and adding in some age-related decline, he can be reasonably expected to put up 27.5 WAR over those seven years. On a dollars-per-WAR basis without making any adjustments, that’s $8.5 million per win. On a per-win basis, that’s exactly what the Los Angeles Angels agreed to pay Anthony Rendon. When we factor in the draft pick penalty the Angels paid by signing Rendon, the cost to the Angels is around a quarter of a million dollars more per win than what Arenado is owed.
There is certainly a lot of logic to the notion that if the Cardinals wanted Arenado, then they also should have been in on Rendon as the latter was available for roughly the same monetary cost without having to give up any players. That logic also extends to Josh Donaldson, who, while older, is currently a player of comparable skill to Arenado and signed for $92 million over four years, a sum that is only $22 million more than Arenado is set to make over the next two seasons. There’s also the matter of Kris Bryant’s availability, though that doesn’t affect a decision for the Cardinals. In fact, now that those other players are gone, Arenado might be the only player actually available who can offer a significant upgrade for St. Louis. While these discussions are focused on the Cardinals, somewhat similar logic is in play for other potential suitors like the Braves or Rangers.
If we acknowledge the current scarcity, then we can talk about reasons why Arenado might be better than Rendon. Arenado is younger and has displayed better health, and playing home games in Colorado and road games without the Coors effect might be slightly suppressing the 130 wRC+ he’s put up over the past three years. If we were to add a one-million-dollars-per-WAR premium on Arenado over Rendon, we end up with Arenado’s projected worth about $30 million above what he’s expected to be paid. Now all of a sudden, Andrew Knizner plus Matthew Liberatore and a couple less consequential prospects looks like a reasonable deal from both sides. But then the opt-out gets in the way.
A year ago, Ben Clemens took a look at the opt-outs in the contracts of Manny Machado and Arenado to try and determine their value. For Arenado, he either performed like a five-to-six-win player for three seasons and then opted out or he averaged a little under three wins per season for eight years. That scenario made Arenado’s opt-out valuable at that time, costing a little over a million per WAR compared to a contract without one. That gap has only widened over the past year with Arenado still playing very well and getting a year closer to the opt-out. With the opt-out, the expected rate of pay per win for Arenado gets up near $11 million per win. Adding Liberatore and Knizner to Arenado’s contract with an opt-out makes the cost of Arenado something like $13 million per win. While it’s easy to say that it isn’t your money and to just go get him, it makes less sense when Donaldson and Rendon were available for significantly less or that paying for wins at that price could enable a team to present an overwhelming offer to get a better player like Mookie Betts or Francisco Lindor.
The solution to this Gordian knot is to simply cut the opt-out, a part of the contract that came from the Rockies’ front office. No reasonable trade can be made with the opt-out still intact. Colorado could offer to conditionally pay $8 million per year if Arenado doesn’t opt out, but agreeing to pay $40 million and still not getting a great return package isn’t that feasible. If Arenado was willing to accept a $30 million team option on an eighth year with a $15 million buyout, that wouldn’t come close to the value of the opt-out, but it might provide enough incentive to waive that opt-out. Unfortunately, adding that $15 million guarantee also decreases the potential return. Maybe Knizner and Dakota Hudson are enough to headline a package for Arenado, but if the Rockies want Liberatore or a better prospect like Nolan Gorman or Dylan Carlson, then Colorado should expect to kick in some money, something like three million to five million dollars per year over the life of the contract.
It’s difficult to find a palatable deal for both sides despite Arenado’s considerable talents on the diamond. His opt-out serves to ruin any trade value he might have because he provides potentially two good years of play, but just as likely are seven seasons that are only slightly above-average for more than $30 million per year. Eliminating the opt-out should be a precursor to any deal and the trading team will have to accept more financial responsibility, but if the Rockies actually want a good return, they are going to have to respond by paying down some of Arenado’s salary. There might be an avenue to get to a trade, but there are still quite a few bumps that could prevent teams from traveling that road.
Craig Edwards can be found on twitter @craigjedwards.
I still find it hilarious people try to suppress Arenado’s value by bringing up Coors. It’s still 347 feet to left and 390 to left-center, places Nolan normally hits. Plus, humidifiers.
He’ll be a good hitter wherever he plays, but Coors field makes it easier to hit for avg as curveballs don’t drop as much, and the outfield is far more spread out.
And then players struggle on the road because they’re not used to seeing breaking pitches with that much break. The Coors hangover effect is real and pretty well documented, and deserves to be brought up any time someone points out the obvious fact that everybody hits better at Coors.
Maybe it’s because over his career he hits 324/380/615 in Coors and 265/323/476 everywhere else.
DJ LeMahieu 2018 Home: 317/360/433, Away: 229/277/422
He then produces a 5.4 win season with the NYY in 2019 after a 2.1-win season in 2018.
Mike Petriello, for MLB.com in 2015, found no effect for Matt Holliday, Dexter Fowler, Seth Smith, Chris Iannetta and Clint Barmes. Corey Dickerson has thrived after leaving Coors.
There is NO Coors Effect. Move on.
“There is NO Coors Effect. Move on.”
Ignorance is bliss eh
There IS a Coors Effect, and it’s NEGATIVE, not positive. That’s the previous poster’s point, and it is correct.
Coors effect is negative? LOL
Uh, remember me? Love, Vinny Castilla
Are people still out here in 2020 pretending that Coors doesn’t make it dramatically more difficult to hit on the road?
My apologies. You were only reporting the home/road difference about current Rockies players. Not saying that difference caused their trade value to decrease. I shouldn’t have snarked at you. I’m sorry.
Maybe the reason for his good health is those humidifiers are helping him with congestion
Maybe the new team can bake the cost of a netty pot into the trade discussions.
I agree the opt-out adds so complications so it’s hard to trade him, but the analysis Ben did doesn’t really easily translate to this situation because that’s from the perspective of the player, not the team. So let’s take a look at the surplus value on the Arenado contract based on the projection for next year (5 wins) and assuming a 0.5 decline on the next year of the contract: 9.5 WAR, $70M. If you use $9M/win, that’s $15.5M in surplus value.
Now, if we keep expecting a 0.5 decline, here’s what we get for the surplus value for the five option years: 15 WAR, $164M, for a -$20M in surplus value.
This is an *awfully convenient* number: $15.5M, plus whatever surplus value he earned last year, almost *exactly* balances out the expected loss on the opt-out. And it’s *awfully convenient* that it tracks nearly perfectly with Rendon’s deal, who is widely considered an equivalent player at the same position, so it still looks like market value even from that perspective.
I’m sure you can mess around with wins being more valuable now vs. in the future or $ being worth more now than in the future to come up with some slightly different numbers, but from where I sit I’m (a) not all that freaked out by the opt-out if I was just taking on the contract straight without giving up anything else and (b) not sure I’d be willing to give up a whole lot in terms of prospects to get him unless the Rockies kick in a whole bunch of money. Which they might be willing to do, but that’s where the opt-out becomes a huge problem (and Craig sort of explains this, but it’s worth spelling out): If Arenado opts out, that money disappears. The Cardinals or Rangers or Braves are not going to send their good prospects for the Rockies promise to pay down a contract that may not even exist.
The problem with looking at it that way, which is why Ben’s piece works well here, is that Arenado doesn’t decline normally in the non opt out situation. If he puts up 10 wins the next two seasons, he probably opts out. For him not to opt out, he would need to put up just 8 or 9 or worse and then when he’s opting in, the decline is a lot worse than the negative 20 million.
I think the “probably he opts out” is where the analysis goes off the rails. He’s guaranteed 5 years at 32 AAV per year in two years when he’ll be in decline or heading to decline.
That’s a lot of Benjamin’s ( named for FGs own Clemens) to walk away from with no guarantee of besting it – let’s face that’s a really, really AAV and a lot of risk to opt out.
But, you say, two years of 5 WAR shows he can still do it. Do you really care if 31 year old arenado goes elsewhere for 7/250? You’ve just gotten two stellar years, two shots at the playoffs. Let him go like they let Pujols go.
Now your back to what do you give him. Two good rookies and Carpenter sound like a fair trade. If arenado plays to type you have him for 6-7 years and loving it. If he plays like babe Ruth for two years you have two shots at the title and get out from under the deal for his golden years ( or top him up if you want those decline years )
This doesn’t seem that hard to me
Yeah, that doesn’t seem like a problem to me. If he puts up 9.5 wins the next two seasons and opts out, that’s great news for the Cardinals. They just got a great player for two years and don’t have to worry about the back end. And if he puts up 2.5 wins for the next two years and doesn’t opt-out, then that’s the same as if the opt-out isn’t there. Yeah, it sucks, but that’s not because of the opt-out, it’s because there’s $164M in liability that would have been there regardless.
Under this logic, if they’re worried about him being bad and never going anywhere, they can pretty easily, they can just tell the Rockies to kick in X number of dollars per year for however long the contract lasts. Right? If you’re worried about it being -$50M over the life of the contract, just have them pay it up. The problem comes in with the flip side of it, where agreeing to pay $7M per year is a whole lot less valuable if you opt out after two years, and suddenly your subsidized player is gone (regardless of whether he was good or bad).
If Arenado puts up 10 wins over the next 2 years and then opts-out, whoever he plays for should be ecstatic. Based on the current assumptions, if he puts up 9.5 WAR over the next two years, the remainder of his contract post opt-out is worth ~-$20M. A half a win over the course of two seasons is not enough to change the trajectory of his contract by over $20M. Hell, even if he puts up 12 wins over the next 2 seasons, the contract is still likely to project as negative value. Considering that if you take the best two seasons of Arenados career, they only add up to 11.6 wins, I think there’s about a 5% that his contract projects to have surplus value 2 years from now.
Even if Colorado has to sweeten the deal a little and throw in some cash or lower their return expectations, I think they need to get a deal done this offseason. His value drastically decreases as time goes by. They are also in no places to compete and need to go into rebuild mode which isn’t really possible until they shed Arenados contract. By not dealing him, they’re just prolonging a period of mediocrity and delaying a return to contention.
Those surplus value assumptions don’t work because the opt-out is only ever a negative outcome for the team: if Arenado outperforms his contract, he’ll opt-out, but if he underperforms he’ll opt-in and the loss over the option years will almost certainly be more than your estimate.
Whether the opt-out is a negative outcome for the team or not is irrelevant here (which is frankly more an article of faith about the rationality of markets than anything someone has ever empirically demonstrated). The opt-out exists. The question is compensation. Even under your expected scenarios, the same dilemma exists. Let’s say that the Rockies offer to pay down $7M of the contract in a year. In the first scenario, this is way, way less compensation coming back to Cardinals than in the second. That’s the problem. The Cardinals could very well be willing to give up extra prospects to reduce the salary commitment in future years, but giving up the extra prospects to reduce a financial commitment that doesn’t exist is an accounting nightmare.
Eminently solvable. Just have the Rockies throw in a PTBNL, the quality of which is conditional on whether Arenado opts out. The PTBNL would be equal to the amount of cash the acquiring team would lose if Arenado opted out.
PTBNLs are drawn from a list of current prospects, usually. The teams say “You can have one of these six prospects” “I’m not sure which one” so they agree to wait a bit. You’re proposing a PTBNL to stretch out over two years, which I’m not sure if that’s even legal under the current rules (I believe it’s within 6 months), and if it was, would be *extremely* valuable to the Cards/Rangers/whatever because they could just wait and see how they pan out.
This is ultimately a discussion about what is the value of a market value contract.
What I always struggle with in these opt-out and surplus value discussions is the underlying assumption of a rationale predictable market that a player and his agent can accurately forecast. There is always comments of if he puts up X WAR he will opt-out and if he puts up Y WAR he won’t. I guess I put less value on the opt-out cause a 31 year old Arenado in 2 years I think will be hard pressed to beat a 5/165 deal. I think players with these opt-outs are generally risk-adverse (look at JD Martinez whom one could argue based on the pure math should have opted out) and tend to only opt-out when it is overwhelmingly obvious to do so (Tanaka another recent example of someone who didnt where the math might have pointed toward him doing so). The players and their agents recognize the free agent market has been wonky lately, and no player or agent wants to be the ones who opted out of a 5-165 deal and winds up getting 4-100 or something. So this is long winded way of saying in my calculus I plan on no opt-out used 90-95% of my simulations regarding Arenado and thus apply a very low value to it.
Exactly. In normal opts there still some room to move at the top end of AAV. $32 million AAV is insanely high. It’s basically an out of the money option. Arenado can bring it closer to at the money with two strong years but even then the chance of topping 5/165 comes with a lot of risk. Plus the safest thing is then for the Cardinals to add a year or tweak AAV which keeps arenado from taking the risk of opting out. I just don’t see the opt out being a controlling factor
“Maybe Knizner and Dakota Hudson are enough to headline a package for Arenado, but if the Rockies want Liberatore or a better prospect like Nolan Gorman or Dylan Carlson, then Colorado should expect to kick in some money…”
Knizner, sure. But per the Fangraphs Depth Charts, out of 270 positions across 30 teams, right now the weakest position in all of baseball is by far the left fielders of the Colorado Rockies, at *negative* 0.4 WAR. Knizner plus a left fielder like Tyler O’Neill or Lane Thomas or maybe even Justin Williams if the Rox prefer him for some odd reason, plus Matt Carpenter, plus a mid-level prospect like Genesis Cabrera would be a fine match.
And as for the opt-out complication, I think Craig hit the nail-head when he said:
“If Arenado was willing to accept a $30 million team option on an eighth year with a $15 million buyout, that wouldn’t come close to the value of the opt-out, but it might provide enough incentive to waive that opt-out. ”
There are plenty of creative ways to tweak the contract, to induce Nolan to come to a team that (1)has his good friend Goldy on the roster for the next half decade, and (2)always has a shot at October baseball.
Maybe Arenado doesn’t want to be traded until he can opt out and pick where he wants to play.
But if that was important to him, he shouldn’t have signed an extension in the first place.
Whatever happens, I can say with relative confidence that Bridich and Monfort will fuck it up.
…and you were right on
Why would the Rockies want Carpenter and his awful contract?
Because they’re the Rockies and they love blocking young talent with veterans past their prime. Carp would fit perfectly into their vision.
A large chunk of the remaining money on Carpenter’s contract would presumably be viewed as dead money that increases the prospect talent return for the Rockies.
I don’t understand why even Craig Edwards talks like the opt-out is anything but change in the expected surplus value of the contract to a modern MLB front-office. I find it hard to believe they can’t account for the value of the opt-out almost as easily is they could account for the value of more or less guaranteed cash.
Arenado’s contract’s expected value is based on a probability distribution of potential WARs over the first 2 years and the last 5 years of the contract. The opt-out lowers the expected value because the team no longer benefits as much from most of the upside outcomes. Our problem as outsiders is that we tend to work with median forecasts which aren’t enough information to value the option but assuming the teams are modeling outcome distributions, I’d think assigning a dollar value to an opt-out would be trivial.
I largely agree with you.
I’m surprised not to see any mention of Stanton in the article or comments, because the contract situation is similar. When traded, Stanton had 10 years left on his contract (running through age 37) with an opt-out after 3 years. Arenado currently has 7 years left on his contract (running through age 34) with an opt-out after 2 years. Both Stanton and Arenado have full no-trade clauses.
Stanton was, of course, ultimately traded to the Yankees. The Marlins also worked out trade terms with both the Cardinals and Giants according to numerous reports, but Stanton utilized his no-trade clause to reject both of those trades. In short, we saw a similar contract situation two years ago and teams still figured out how to agree on trade terms.
I think there a few reasons why that worked while this one didn’t. The first reason is because he had an opt-out after 3 years, not 2, and for some reason that seems to matter. The second reason is that the back end of Stanton’s contract was, and still is, so undeniably gigantic that nobody believed he would opt out no matter how well he was hitting. The third reason is that the Marlins just wanted to dump salary, and so the question of paying down salary so that they would receive better prospects never really started to go through.
Of these, I would argue that #1 is probably a bit overrated but somewhat salient, #2 is not all that different than what we have here but does seem to be on everyone’s minds, and #3 is mostly a concern only if #2 doesn’t exit.
In fact, we know that teams are willing and able to assign a value to an opt-out, because they sign free agents to contracts that include opt-out classes.
Why is trading for a player whose contact includes an opt-out any more problematic?
Of course, teams might value the opt-outs differently, complicating trade negotiations — but that’s true of any asset (or liability). It doesn’t make an opt-out an insurmountable obstacle to a trade.
If it weren’t for the no trade clause, a possible solution would be an option for the trading team to send Arenado back to Colorado after 2021. If Arenado doesn’t opt out, it’s likely to correlate with his contract being a dud.
The other way to address it – and IMO the more realistic way – is for the Rockies to agree to send some money to the Cardinals contingent on Arenado not opting out.
The Stanton trade is a precedent. The Marlins have agreed to send $30 million total to the Yankees if Stanton doesn’t exercise his opt out after the 2020 season. If the information at Baseball Reference captures the timing of it correctly, the Marlins also reduced the NPV of it by paying these dollars over 2026-2028 (the last two guaranteed years of the contract plus the buyout of the team option for 2028).
No idea why the Rockies want to trade him a year after he signed. It isn’t like he wasn’t great last year. How poor does the front office have to be that they change their minds within a year and all he did was put up 6 WAR?
If something has radically changed so that management feels they won’t be competitive in the front end of the contract, trading an asset that doesn’t fit into your window is probably better than holding the depreciating asset through the expensive years.
On paper, going after Rendon or Donaldson would have made sense, but this seems more personal than practical. The Cardinals obviously prefer “Nolan Arenado” over another player with similar abilities. They’ll go over their self-imposed spending limit and give up players to get him … but only within reason.
I sure wish the Nats could find a way to trade for Arenado! Without a better offense, Soto and Turner are it, I see no way for a repeat and third is the easiest place to improve. But it’s so unlikely.
Yeah. They could have just signed Rendon if that was their plan.
Let’s see if I understand this correctly. The Rockies signed a guy, Arenado, who has been ridiculously consistent at stud level in his age 24-27 seasons, to a contact with an AAV pushing $35m. They give him an opt-out after his age 29 season. It appears they’ve come to their senses and are afraid he’ll exercise it, so they want to explore trading him now.
1. Much like the David Price situation in Boston, why in hell would Arenado choose to opt out from Colorado? He’s gonna get the money anyway, but unlike Price in Boston, if he stays in Colorado, he’s likely to continue to produce, at least for 3-4 years, at or near the level he’s set since 2016. He’s not opting out of anything in Colorado. Why would he?
2. The problem then is 2022-2026, Arenado’s age 30-34 seasons. Even if he stays in Colorado, I don’t think anyone sees him producing bigger value than his contract, at least the last 2-3 years.
3. So if I’m Colorado, of course I’d like to get out from under Arenado’s contract. The fact that I’d have to pay part of it to get rid of him? Well, that speaks to the stupidity of whoever approved that contract in the first place. Sorry Colorado, you screwed yourselves. You should have cut bait instead of giving Arenado this deal in the first place. This is the exact same scenario playing out in Boston with Mookie Betts, and I would give them the same advice – cut bait, get a haul of prospects, and move on. Mookie ain’t gonna be worth it at the end of a 10 year deal.
4. If I’m any team other than the Rockies, why in hell would I trade for Arenado? Chances are his stats drop 20% leaving Colorado (I know, DJ LeMahieu…). And when that happens, he opts out after 2021 and that team is out the 2-3 studs they had to fork over to get him.
So what is the take from all of this? Colorado made a huge blunder giving Arenado this contract. Arenado is in the catbird seat. And no team should trade for him unless the Rockies are willing to pick up half of his contract for two years. Which ain’t gonna happen. Throwing good money after bad tends to get you fired eventually.
Rockies, you reap what you sow. Sucks being you. Be smarter next time. Learn from Boston and David Price, don’t copy them.
When you are Jeff Bridich, and “Hubris” is your middle name, this is what it winds up looking like.
The answer to this quandary and many others is The Ian Desmond Contract.
Why do FanGraphs insist that WAR is worth $8.5 million? Who pays $8.5 million for each WAR? WAR is worth about $5 – $6 million.
It’s unfortunate this team is shopping Arenado just a year after the extension was signed. He sure sounds rather pissed about both that and how poorly this front office was able to build a team around a playoff caliber core.
I think a lot of money is owed if Arenado opts out, but that his value is under appreciated. We have seen talented enough Rockies hitters continue to mash without 81 games in Coors, on another team, where WAR penalizes much less harshly on park adjustment. We also have an exceptionally talented defender who perhaps makes a less glove happy shortstop play up – Semien has turned into an MVP candidate, and he just so happens to have the only other 3B in Arenado’s defensive stratosphere playing to his right.
Arenado is an easy top 20 player in MLB, and he can’t be happy about forgoing his shot at FA with an organization so quick to change its lane.
Loved this write-up, Craig!