Derek Jeter's Player Option and $189 Million

Update: William did this issue a much better service on his own blog earlier this month. Definitely take a look. It appears that some of my assumptions are wrong, particularly about how a Jeter opt-out would affect the 2014 cap hit. It looks like the better scenario is to take my same logic, but extend Jeter right now, before the season starts. An interesting thought came to my mind during an otherwise slow baseball week this morning. After the 2010 season, Derek Jeter signed a 3-year, $51 million contract with a player option or buyout for the 4th year. That player option can get bigger if Derek Jeter satisfies some criteria in 2013, but for now let's call it a $9.5 million player option.

If Derek Jeter exercises that option, the Yankees will pay him $9.5 million in 2014. However, because the option is a continuation of the contract he previously signed, and assuming I'm not reading the luxury tax rules wrong, his AAV/Cap hit would be $15.125 million. Given how tight the Yankees are going to be in 2014 with the $189 million threshold, the $5.625 million difference is significant: it could be the difference between being able to afford to resign Robinson Cano or not, or any number of other moves.

The Yankees should have an incentive to get Jeter for as low a cap hit as possible. The simplest version of this is to strike a handshake deal with Jeter: He does not exercise his option, receives his $3 million buy out, and the Yankees resign him for $6.5 million. Its all the same to Jeter, while the Yankees free up some roster space to help make Derek Jeter's team more competitive.

Great idea! Of course, it probably can't work out that cleanly. First off, I don't think there's a lot of evidence that the Yankee front office has that kind of great business relationship with Derek Jeter and his legal team to pull off a handshake deal. The last round of contract negotiations were very messy, and there is a lot of money at stake, even if the incentives line up for both Jeter and the Yankees to do it. Second, I think Derek Jeter will want use the opportunity to both secure more money and guarantee him long term playing time as a Yankee, going into his old age.

Still, I think that there is a scenario that works out for both sides. The Yankees want to lower their cap hit, and Derek Jeter wants some extra cash and/or long term security. I don't think that a one-year deal would work, but this certainly sounds like a longer term deal could be in the cards. Let's say that Jeter has a solid but not extraordinary 2013 season: something like a 110 wRC+ season where his defense is about as bad as it was in 2012, valued at about 2.0-2.5 wins. What about a 3-year, $25 million deal? Jeter's cap hit would decrease to$8.3 million, and he would probably earn more money than he would by taking the $9 million option and hitting the market as a free agent.

The Yankees have a lot of roster space to fill in 2014. They're going to need every penny. There's no room for negotiating down the unholy trinity of Arod/Teixeira/CC contracts, and a potential Robinson Cano contract could be just as odious. They should start exploring these kinds of options.