June 19, 2021

Valuing Gerrit Cole’s Opt Out (FanGraphs)


Last night, Gerrit Cole signed a record-breaking contract with the Yankees. Jay Jaffe broke down the signing, and mentioned one important part: the contract includes a player option after five years. In a contract as lengthy and lucrative as Cole’s, an opt out might seem like mere ornamentation. That’s not the case, though: as Stephen Strasburg’s earlier contract shows, sometimes the market in the future is simply better for a pitcher than we think. With that in mind, I took a stab at valuing the player option.

We use two player projection systems here at FanGraphs, and I ran both of them through the option pricing tool, as well as a hybrid. First, let’s take a look at the most optimistic: Steamer projects Cole for 6.3 WAR this year. From there, I applied a standard 0.5 WAR/year aging penalty and ran the numbers. You can read the methodology here, but as a quick refresher, I take an aging-inclusive projection, then bump each year by a random, normally distributed number to account for fluctuations in talent level.

The bumps persist year-to-year; if Cole improves to a 7 WAR projection for 2021, his mean projection for 2022 would be 6.5 WAR after the aging penalty,…

Read “Valuing Gerrit Cole’s Opt Out” at FanGraphs