Evaluating the Arenado option for the Cardinals



According to this report today from Ken Rosenthal of The Athletic, the Colorado Rockies are almost certainly going to trade their franchise cornerstone, and it appears Nolan Arenado might be on the move sooner rather than later. As Rosenthal notes, a potential deal is complicated by dollars (Arenado is owed up to 234 million more of them) and by his opt-out – he can leave whoever acquires him for free agency after the 2021 season.


For fans, a potential deal is less complicated: Nolan Arenado makes your team better and the owners dollars aren’t your dollars. According to the current projections, Arenado is forecasted to be the fifth best third baseman in the majors next year and 13th best overall position player.


Those projections don’t really matter to you, though, unless Nolan Arenado is acquired by your team. In my case, that team is the Cardinals. As a Cardinals fan, I know Mr. Bill deWitt can be tight with deWallet, and that Mr. John Mozeliak holds his baby birds close to the nest. A complicated deal gets tougher.


According to Rosenthal’s report, however, the Rockies think they can win in 2020. The rumors of the asking price for Arenado have generally included Arenado alternatives in the form of good-but-not-great-and-somewhat-cheaper major league veterans. If all the rumors are true, that Arenado will be traded and the Rockies still think they can win, then the Rockies belief in themselves should work in the Cardinals favor. St. Louis can offer a good-but-not-great-and-$17-million-cheaper, immediate replacement for Nolan Arenado in the form of Matt Carpenter. Let’s assume the Cardinals are both willing to take on the extra money and give up the Galveston Grinder, and we’re closer to a deal.


An Arenado deal doesn’t stop there, though. We need to know the rest of the asking price. To do that, we need to estimate how much value Arenado will provide to his next team. To do that, we need to deal with his opt-out.


Ben Clemens, one of my favorite former Cardinals writers, developed an in-depth framework to value contract options. Read about his methodology here, and his valuation of Gerrit Cole’s contract options here. His methods are better than mine, and I hope he writes about Arenado before a trade happens. He built on a method I first saw from Jeff Sullivan, and The Hardball Times dabbled in options as well. My model is less robust than theirs. For my less robust model, I made the following assumptions:

  • Teams, today, are willing to pay $9 million per Win Above Replacement, consistent with FanGraphs' recent research.

  • In the future, teams will be willing to pay between $8.5 million and $10 million per WAR.

  • Surplus value is expressed as a player’s value, converted to dollars, over or below the salary they are paid.

  • A player’s baseline talent is constant through age-30, declines by 0.25 WAR from age-31 to 32, and declines by 0.50 every year after.

  • Actual aging uses the baseline and random variance with specified limits to project the player’s value each year. My model ignores catastrophic, career ending injuries, which seem rare enough that ignoring them won’t make much impact.

  • If Arenado ages so poorly that he produces sub-replacement level production, the team elects to stop playing him but still has to pay his contract.

  • Nolan Arenado values the certainty of his existing contract at $5 million, which means he’s more likely to opt in than out after 2021, if his projected new contract value would be too close to his existing contracted salary beginning in 2022.

  • I used Arenado's contracted salaries as reported by Spotrac.

Using those assumptions, we can estimate the future value of a player. Nolan Arenado is currently projected for 5.0 WAR in 2020 according to FanGraphs, which I used as the baseline for 2020. Now, that doesn’t mean he’s always worth 5.0 WAR in 2020 – he might be worth up to 5.7, and he might be worth as little as 4.3. Completing a 5.7 WAR season in 2020 changes his outlook compared to if completed a 4.3 WAR season. Following the 2021 season, our Arenado Excel Sheet assesses his projection, at that point in time, and decides whether to opt-in or out. After running the simulation a bunch of (100,000) times, and I got this:

Intuitively, this works. If Arenado performs well in 2020 and 2021, he’s more likely to opt-out to test free agency while his value is high. If he underperforms, he opts-in to keep his guaranteed money. Arenado is really good right now, and he’s relatively young – in two years, he’ll probably still be really good and still only 30. As a result, in this simulation, Arenado elects free agency after the 2021 season 70% of the time. Putting it all together, and Arenado’s projected surplus value, calculated as a weighted average, is about $16 million.


For the team, whatever Arenado decides is a double-edged sword. For one, if Arenado opts out, that likely means he performed well for his team for two years, and the team would have won more games because of him. That's good! After that, however, he leaves, and the team gets nothing. Maybe a draft pick, if they extend a qualifying offer.


The rest of the time, Arenado elects to stay with his team. In all likelihood, this means that (1) Arenado performed worse than expected for those two years and (2) his future outlook is consequently lower. Remember, though, that Arenado is starting from an incredibly high baseline (he's been worth at least 5 WAR for four straight seasons), and his guaranteed dollars set a really high bar for him to opt-out. Even in this downside scenario, Arenado still averages 4.5 WAR in his first two seasons with his new team, and compiles 17 WAR over five seasons thereafter. That’s still a really good player, even if it’s a slightly overpriced player. While Arenado produces about $12 million less value than he’s paid in the outer years, he total contract is only $2 million below market value. Two million shouldn’t break the bank for any MLB team, and neither should $12 million.


Keep in mind that these are averages of tens of thousands of scenarios. Sometimes, Arenado’s deal sucks. In this model’s version of doomsday, Arenado produces 7.9 WAR over the next two years, opts-in, and then compiles only 5.4 WAR in the following five years. Paying $35 million a year for a one-WAR player isn’t the best way to win games. In other scenarios, Arenado’s deal is a steal: take a wrinkle in time in which Arenado just barely reaches 5 WAR per season in 2020 and 2021, but then maintains similar production (or even improves a little) for the next five years. It’s not likely, but look no further than Adrian Beltre to see the possibility.


So what does this mean for Arenado's price? The Rockies, reportedly, are willing to take on other veterans and their contracts to trade Arenado in a public effort to win. I’d speculate that they also believe that taking on some money will help them get more in prospects. Given that context, I think a deal with the Cardinals for Arenado has to start with Matt Carpenter. I actually have Carpenter at a negative ~$10 million value compared to his contract, but he would help the Rockies win and he costs less than Arenado. With Carpenter in the deal, the Cardinals have to find $26 million in prospect value instead of $16 million – a longer-term win for the Rockies.


Who those prospects might be is fodder for speculation among those who know prospects better than I. According to Craig Edwards’ prior research at FanGraphs, $26 million of prospect value equates to a top-50 to top-75 prospect or a back-end top-100 guy and another sitting a bit outside the rankings. Maybe, for the Cardinals, that’s something like Elehuris Montero (as Arenado’s hopeful long-term successor) and Andrew Knizner. I don’t know and I won’t pretend to.


Frankly, though, I wouldn’t be surprised by an Arenado for Carpenter / Montero / Knizner deal. My model could be wrong (changing any assumptions can drastically change the picture, and my methodology is crude), but this lines up with my prior expectations. Arenado makes this team a legitimate contender again for at least two more years. If Montero and Knizner are what it takes to get it done, then the Cardinals should get it done.