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Sounders Sign Sammy Ochoa

Interesting moves by the FO today as they traded up the allocation pecking order to secure the signature of Sammy Ochoa.

Prost Amerika has a match report of the one reserve game he featured in for us, in which he also scored the game-winning goal.

Beyond that, not much is known about him other than the Sounders have been working very hard for a while to have him sign with the league. He's a USA youth product, and he has a previous working relationship with Sigi dating back to their time together in 2005 with the U-20's. He's a forward, he's young, and he recently spent time in Mexico with Estudiantes Tecos playing alongside Herculez Gomez.

The interesting thing here is the maneuvering of the club and what they did to acquire another trialist. We all know that the FO was disappointingly unable to acquire a big name signing during the international window, and with the national window closing in two weeks, the Sounders still had an allocation spot at #6.

Rumors have been swirling for a while now of the Sounders hopefully trying to land Marcus Hanheman in case he returns back to MLS. However, that move has been all but ruled out from an allocation standing point of view. In order to acquire Ochoa, Seattle gave Chicago their third-round draft pick, which put them ahead of the Fire and Sporting KC.

Why I am pointing this out is a bit of economic theory and the art of negotiation.

Chivas have been sitting on their number #1 allocation spot and have yet to capitalize on it. They've already passed on big names like Benny Feilhaber and Freddy Adu. In return, they still have their #1 spot, while Philly and NE have dropped to the bottom on the table.

So, like in all negotiations, having the right to go first is extremely valuable. However, that valuation entirely depends on what Chivas' intentions are. Did they pass on taking Feilhaber and Adu, neither of whom are designated players, simply because they were not the right fit for the team? Or, did they pass because neither player was worth enough in money value for a #1 spot.
This begs the question, how much is a #1 allocation ranking in this league? And to answer that is extremely hard. As we all know, the league is undergoing a rapid growth phase, where former Americans abroad are now returning to join MLS teams. Some are big names, like Adu and McBride and (potentially) Hahnemann. But others like Ochoa would clearly not be worth the money.

So as the clock counts down to the close of the window, Chivas must be holding out hoping for an even bigger name than Adu or Feilhaber. Someone like Hanhemann perhaps? The thing is, we as fans and bloggers have no way of knowing. So unless we know something that the majority of the rest of MLS clubs don't know, we ultimately don't know how much a #1 spot is worth.

Think about it like this: if Clint Dempsey tomorrow morning suddenly decided he wanted to come back to Texas (god forbid, FC Dallas), then he would be forced to go through the allocation system. In that case, Chivas would have first rights to a player potentially worth many millions. It's the probability of a big name player going through the allocation system is what makes the rankings worth so much.

Essentially, you could also think about the ranking system as an auction of options. In the financial world, stock options are the right to buy and sell a certain thing at a given date. One thing with options is that every month, there's a week where all the stock options are set to expire. That week, expiration week, is a hectic rollercoaster where billions of dollars either expire worthless, or go into your pocket as a humongous profit. For MLS, that expiration date is September 15th.

In an attempt to not make things too convoluted, I'll try to simplify what happens with stock options. Options measure the value of the underlying thing, so if the thing goes up in value, then the option to buy it also goes up in value. Similarly, Chivas' #1 pick right now would be worth tremendously more if a Dempsey or Jozy came through than for Sammy Ochoa. However, options are also susceptible to time decay. As in, if we all know that Dempsey is going to announce that he is returning in the expiration week of September 15th, then Chivas' #1 ranking increases in value as we get closer and closer to the end of the window. There's a bunch of math I could get into involving time decay and greek variables, but I won't.

So, knowing that, it's clear that Chivas have something potentially worth at most the value of a DP contract. But, if no one comes through the allocation system in the next two-three weeks, they receive no player, and more importantly no money.

Now going back to the Sounders, since this is a Seattle blog, the situation with what we did with Chris Seitz is relevant. Back in December during the off-season, there was the re-entry draft. The Sounders again were stuck with a top-to-middle draft pick of #9, but chose Chris Seitz. Then, in almost the same day, the Sounders dealed Seitz back out to FC Dallas, where they got a fourth round draft pick in return. In that scenario, the Sounders picked up Seitz betting, or more likely, knowing that another team had interest for him. This is yet another important feature of how to value the position of allocation rankings, because knowing another team is determined to sign a player can be worth an equivalent value in draft picks or allocation money. It's part of the bargaining and haggling that the minefield of MLS restrictions creates.

Which is why I immediately questioned the pick-up of Ochoa. Seattle acquired Chicago's #4 spot by giving up a third-round draft pick, which means they believe Ochoa is worth at least that. However, Chivas, Houston, and Toronto all passed on him, for whatever reasons they may be. Perhaps he's not a good fit for those systems, or maybe they have another player in mind waiting go through the allocation system. Or, it could be as simple as Ochoa didn't trial with them. Either way, Seattle felt so determined to snap him up that they gave away their allocation spot and a draft pick.

So, if the other teams didn't snap him up because they didn't know about him or because they didn't think he was valuable enough, then we just got a very good deal. In fact, considering that we were able to use up our allocation spot and get it over with, then we could be walking away looking like very savvy businessmen. On the other hand, if the previous three teams all passed on him only because they don't think he can cut it (assuming all the teams have full information on the player), then we would be looking pretty dumb. It's all about incentives here.

Information is a weapon in the study of economics. If say for example Columbus Crew have been working up a major American signing, say Damarcus Beasley or Michael Bradley, all season, then Seattle could have used their spot as a very lucrative bargaining chip. But that would mean Seattle's scouts and agents would have to be in the know, and have dependable knowledge for what deals would be developing.

If I were to judge this giving my full 100% trust behind the FO, then I would say we've done a pretty good bit of business. The realistic likelihood is that Sigi has better insider knowledge of Ochoa's potential, and he could be worth something on the order of a #1 spot at some point in the future. If you want to be more critical, one thing to think about is that during expiration week on Wall Street, people tend to make more brash decisions about where options are, what the true value is, and most often rush transactions without keeping perspective. The FO's decision to just remove themselves from the allocation rankings (and from speculation for a Hanheman transfer) is a signal that the team hopes to just focus on nothing else but the results for the remainder of the season. And that's something I like.

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