Yankees Sign Sabathia

Yankees sign CC Sabathia for three years, $69MM with a four year, $92MM player option.
Analysis: Law, Szymborski, Sheehan, Calcaterra.

7/161 would've been fine. But I hate the opt-out clause.

You can break the deal down into two parts, as I did above. The first 3yr/$69MM portion is definitely a good deal for the Yankees; it's been estimated that Sabathia will be worth about $90MM from '09 to '11.

It's the second half that's the problem. If you make a perfect markets assumption -- and that's a bit of a stretch, but not that much -- then there's no possible way that the 4/92 portion has a positive expected value for the Yankees at the time Sabathia picks it up. If he does pick it up, that means that, for whatever reason, it's more than he could've gotten on the open market after the 2011 season. At that point, the final four years are a bad deal for the Yankees.

And if he does opt-out, New York's EV from that is obviously zero, which conveniently eliminates any possible upside after the first three years.

It's not a terrible contract, because he is one of the best pitchers in baseball, and I do like the value they're likely to get in the first three years. But the opt-out really is an awful addition, and things really could get ugly if he gets hurt or declines significantly over the next three seasons.