|Contract length||1 year ($12/yr)||2 year ($17/yr)||3 year ($22/yr)||4 year ($27/yr)|
As you can see, even bumping up Hosmer's future earnings makes the four year deal a non-starter. The other three contract lengths all return roughly the same profit over the life of the deal, so your choices would seem to be to either bank the bulk of that profit in the first year by keeping Hosmer for his option year, or maximizing the total profit with a two-year deal.
However, there are some other things you should consider before signing him on the dotted line.
Inflation is the scourge of all keeper leagues. Simply put, inflation is the amount players bought at auction have their salaries increased because other players were protected below their market value. If you keep a $1 player who would otherwise have gone for $11 at the table, that's $10 more you have to spend on other players. Maybe you use all $10 at once, and get a $30 player for $40, or maybe you spread it around, but either way it gets spent and drives salaries up.
In general economic terms, inflation reduces the value of future earnings. $1 earned in 2013 is worth more to you right now than a dollar earned in 2014, which is worth more than one earned in 2015 etc. In keeper league terms, however, what gets devalued are not earnings but your auction budget. In a redraft league, $260 at the auction table will get you about $260 in player value, depending on your mad auctionating skillz. In a keeper league, if you protect no one and head to the auction table with $260, you will walk away with far less than $260 in player value.
So when it comes to making your contract decisions, leagues with heavy inflation should not, as you might think, encourage you to bank short-term profit. The extra $5 you're saving by cutting a contract short a year isn't going to get you $5 in actual value. Instead, you want to protect your gains for as long as possible. In a league with low inflation, the decision on Hosmer would be between a one- and two-year deal. In a league with very high inflation, the decision is between a two- and three-year deal.
If you want to be more scientific about it, you can also factor this into the chart above by calculating inflation into the Total Earnings row as a multiplier. For instance, if you peg the average inflation in your league at 10%, then Hosmer's year one earnings relative to prices at the auction table would actually be $25.30, year two's total would be $53.90 etc.
Inflation is the most important consideration, but there are a few others that are worth a glance as well. Think of these factors as tie-breakers for when you're having trouble deciding between two similarly-valued contracts:
- You should almost always go short on players with a history of getting hurt, whether it's a hitter whose hamstrings act up with depressing frequency or a pitcher who never seems to last 30 starts. The worst thing for your profit margin is to sign a player and then be stuck with him when he breaks down and returns little to no value at all. Josh Johnson and Carlos Quentin would be good examples of such players. The owners who signed Johnson to a two-year deal after his breakout 2009, or just kept Quentin for his option year after his huge 2008, suffered a lot less pain than the owners who are still waiting for their deals to expire.
- How difficult will the player be to replace once his contract ends? If a player doesn't have a particularly unique profile (your standard off-the-shelf 20 home run corner outfielder, for instance, or a starting pitcher with solid ratios who doesn't strike out a ton of guys) you're often better off going short on his deal, and banking that profit. On the other hand, a player who provides something fairly rare might be worth extending an extra year if the profit valuation is fairly close. Hosmer is a good example of the latter, as it's tough to get double-digit steals from a first base or corner infield slot without sacrificing in the power categories.
- How volatile is the player's production? Players who alternate great years with mediocre ones, or who had an unexpected production spike, should be viewed with caution and signed to a shorter deal. Sure, maybe that means you have to part ways with the next Cliff Lee sooner than you'd like, but the 'downside' to that caution is that you still bank most of the potential profit in a shorter window. The upside is that you don't get saddled with an ugly contract on the next Ricky Nolasco. When a contract seems like a large risk for little reward, you should stay away.
Note that catchers (due to the inherent injury risk that comes with playing the position) and closers (due to the large turnover and flameout rates that go hand-in-hand with the role) should pretty much always be viewed as volatile.
- How good is a player's organization at developing and nurturing players of his type? The Rays, for instance, seem to do very well by their starting pitchers, so that might give you the confidence to go an extra year on Jeremy Hellickson. Whether a player's home park is friendly to him or not is also worth thinking about, although in theory that should already be priced in to his projections.
- And finally, how much do you like the player? It's always more fun to have guys on your team that you actively root for. Since projections are never dead accurate anyway, if you have a man-crush on Jose Altuve and the numbers don't scream for one particular contract over another, why not keep him for the extra year?
Most of the above, of course, applies to auction leagues with salary caps and not draft leagues. Draft leagues decisions tend to require a little more homework but are actually easier overall. Depending on your league rules, figure out what round extending a player to his max would bump him up to, and check out the kinds of players that have gone around that draft slot over the last few years. Look at the same lists for lesser contract lengths, and then ask yourself: would I rather have two players from list A (the players I'd be picking in, say, the fifth round instead of the keeper) or three players from list B (the players I'd be taking in the eighth round if I extended him the extra year)? If the answer doesn't seem obvious, go short with the contract. And if you want to get really fancy with it, you can always try to adapt a version of the draft slot value chart that Jimmy Johnson pioneered in the NFL to determine whether those two fifth round picks are worth more or less than those three eighth rounders.
* - This example may or may not be one I'm staring down the barrel of in my home league.