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Primer on Transactions: Options, Outrights, and Waivers

There are two different rosters that are significant for MLB teams. The first is the 40-man (major league) roster, in force year-round, which consists of players who are under reserve to the team. The second is the 25-man (active) roster, which exists only during the season and consists of players that may be used in games.

The 15 players on the major league but not the active roster play in the minor leagues and are said to be serving an optional assignment. If a player on the 40-man cannot be sent on optional assignment, and the team does not have room on the 25-man (or doesn't want him on it), then the player can be designated for assignment (DFA). The DFA move can only be made when the roster is full (at 25 or 40 players). The team then has 10 days to trade the player, release him, or expose him to outright waivers where other teams can claim and add him to their 25- and 40-man rosters. If the player clears waivers, then, under certain circumstances, he can be outrighted off the 40-man roster with the team still retaining his rights.

Players who can be sent on optional assignment, or can be outrighted, have value in terms of providing flexibility to their teams, especially in the event of injuries or player struggles. Free agents who sign a minor league contract with a team are not on the 40-man roster. Players on the 60-day disabled list are considered to be on the 40-man roster but do not count towards the 40-player limit.

Optional Assignments

In general, teams are granted three option years on a specific player. While it is common to refer to players as having finite number of "options", that get used up whenever the player is sent on optional assignment, this is a misnomer as optional assignments are for entire seasons. Players can be optioned and recalled multiple times within a season while only using one option year. For example, Mike McCoy was optioned to Las Vegas and recalled six times in the 2011 season, but that only counted as one option. If a player spends less than 20 days on optional assignment, then the player is not deemed to have had an option year used (but the player gets service credit and MLB salary for the time spent in the minors).

A player is considered out of options in the season following the use of his last option year, and he must stay on the 25-man roster or be removed from the 40-man roster. In addition, players with more than five years major league service time cannot be optioned without the consent of the player, which is known as Veteran's Consent. In practice, this is unlikely to be granted, and it is safe to assume that a team cannot option a player with five years of MLB service.

Fourth Option Year

In certain uncommon circumstances, a player may qualify for a fourth option year. This occurs when a player's three option years have been exhausted, but he does not have five professional seasons. The crux of the matter is in how "professional season" is defined for option purposes. A season only counts as a professional season if the player spends 90 or more days on an active roster (or 60 days or more days on the active roster and 30 or more on the DL). Rookie and short season leagues do not last for 90 days, so players assigned to these levels cannot qualify (unless first assigned to a full season league).

Most players who qualify for a fourth option year are international free agents signed at age 16 or 17. If they play a couple years in rookie ball, by the time they are added to the 40-man roster, to be protected from the Rule 5 draft, four years later, they may only have one year in a full season league and only one qualifying season. Assuming optional assignments the next three years, the player will only have four qualifying seasons. In general, if a player has two or more full seasons when added to the 40-man, it is very unlikely he will qualify for a forth option; if he has less than two there is a reasonable chance of it though it is not guaranteed

Outright Assignments

When teams want to outright a player off the 40-man roster (usually upon a DFA, but a team can also put a player on outright waivers), their ability to do so depends on a few factors and may require the consent of the player:

  • If a player has not been previously outrighted and does not have three years MLB service (or was a Super 2 in the previous offseason), then he must accept the team's outright assignment
  • If a player has more than three years MLB service or has been previously outrighted, then he can elect to immediately become a free agent without termination pay. The player therefore forgoes any salary or other guarantees under his Major League contract. The player can also choose to accept the outright assignment, in which case he retains the right to elect free agency at the end of the season unless returned to the 40-man roster. An example of this is Scott Richmond, who was first sent outright in 2011, and then again in 2012. He accepted the 2012 outright assignment but elected free agency at the end of the season, which he wouldn't have otherwise been entitled to do.
  • If a player has more than five years MLB service, then his contract can only be assigned to another MLB team without his consent. As such, in addition to the right to elect free agency, he also has the right to simply refuse an outright assignment. In that case, the player must be kept on the 40-man roster (and the 25-man roster, unless the player has option years left and consents to optional assignment) or be released.
Waivers

The rules governing Major League Baseball's transactions are very complex and is hard for any fan to understand the nuance of all of them. Especially difficult are the concept of waivers in baseball. Here we try to summarize Rule 10 of the Major League Rules, which governs how waivers work.

Waivers are simply permission slips that the other 29 clubs give in order for a particular club to make an assignment. Essentially, for a club to make certain transactions (at certain times), they will need all the other clubs to waive their right to intercept in order to proceed. Not all transactions require waivers--for example, two clubs can trade players without permission before July 31 (which is why it is called the non-waiver trade deadline).

There are three types of waivers with three different functions that are summarized in the table below.

Type Function Revocable? Price Periods Available Period Effective Ineligible Players
Trade Assignment Waivers To assign a player on the 40-man roster of one MLB club to the 40-man roster of another MLB club. Yes* $20,000 4:00 pm ET on July 31 through the last day of the season Rest of period Disabled†, Military, Ineligible, Voluntarily Retired, Bereavement, Restricted, Suspended, or Disqualified Lists
Outright Waivers To remove a player from the 40-man roster and assign him to a minor league club. No $20,000 (1) Nov 11 - Feb 15
(2) Feb 16 - 30th day of the season
(3) 31st day - July 31
(4) Aug 1 - Aug31
(5) Sept 1 - Nov 10
(1,2,5) Rest of period or 7 days (whichever is first)
(3,4) Rest of period
Disabled†, Military, Ineligible, Voluntarily Retired, Bereavement, Restricted, Suspended, or Disqualified Lists
Unconditional Release Waivers To terminate the relationship between an MLB player and the club and make him a free agent. No $1 All times Immediate Military List, Ineligible List

* When a player that was previously pulled back from revocable waivers is placed on the same type of waivers during the same waiver period, that waiver request becomes irrevocable. That is, a player who is placed on waivers may only be pulled back once.

† Outright and trade assignment waivers can be obtained for players on the disabled list only if: a) the minimum period of inactivity (15 or 60 days) has elapsed; b) the assigning club guarantees the player is well enough to play.

Procedure to Obtain Waivers
  1. Club registers a request for waivers with the Office of the Commissioner
  2. Notice of waiver request is given out on a private channel to all major league clubs
  3. Other clubs have two days to submit a claim
  4. If a club claims a player on revocable waivers, the Commissioner will automatically revoke the waiver request unless the club notifies his office that they do not wish a withdrawal.
  5. If there is no claim after two days, the player "clears" waivers and can be assigned or released. If there is a claim, the player is granted to the team with the highest claiming priority.
Note: a club cannot request waivers on more than seven players on any single calendar day.
Waivers Claim Priority Order

For trade assignment waivers:

Team with the lowest winning percentage from the current season gets the claim; however a claiming team from same league (ie. American or National) as the assigning team always gets priority over a claiming team from the other league, regardless of winning percentage. This is why, in August, interleague trades are more difficult than intraleague trades. Overall, all trades are more difficult after July 31 because teams can prevent trades that might bolster their rivals by claiming the players that are being traded to their rivals.

For outright and unconditional release waivers:

Team with the lowest winning percentage from the current season gets the claim, regardless of league (unless two teams from opposite leagues are tied in winning percentage, then the team from the same league wins the claim). During the first 30 days of the season, the winning percentages from the previous season are used to determine priority.