A club option is an optional year at the end of the contract which may be guaranteed at the discretion of the club. In most instances, the option comes with a buyout that represents a fraction of the option value. If the player is injured or performs poorly enough that the club believes the option value to be too expensive, the club will typically pay the buyout and decline the option. In most cases, this results in the player being eligible for free agency. However, if a player signed a contract that turned one of his arbitration-eligible seasons into an option season, the option can be declined with the player then entering the arbitration process instead.
Should the club exercise the option, the player is considered signed for the following season at that option's value. Contracts can contain multiple option years.
Following the 2016 season, the Kansas City Royals exercised their club option on Wade Davis before trading him to the Chicago Cubs in December 2016. The option was part of the contract extension Davis had signed with the Tampa Bay Rays in March 2011, guaranteeing his salary for the 2011-14 seasons and including club options for 2015, 2016 and 2017. Davis was dealt to the Royals as part of a December 2012 trade and played for the team from 2013-16, with Kansas City picking up his club option for each of the latter two years in that span.
Meanwhile, the Nationals picked up Gio Gonzalez's club option but declined Yusmeiro Petit's in November 2016. Petit subsequently signed a Minor League contract with the Angels and made the team's 2017 Opening Day roster.