Cincinnati is currently negotiating a potential multiyear extension with the right hander, according to general manager Walt Jocketty (via MLB.com's Mark Sheldon). Bailey could also sign a one-year deal with the club and become a free agent after the season.
Jocketty said the two sides "continue to keep talking."
"We had another conversation today. We'll continue to keep talking. We'll talk again in another day or so and get something resolved one way or the other. There has not been a lot of progress, but good conversations anyhow."
If Bailey and the Reds are unable to come to terms on a long-term deal, the 27-year-old would likely be one of the most sought-after free agents next winter. He's coming off of his second straight 200-inning season, posting ERAs of 3.68 in 2012 and 3.49 last season.
The Reds appear to be actively pursuing an extension, but if there continues to be an "enormous gap" between their offers and Bailey's demands, the team could decide to extend Bailey a qualifying offer next November and attempt to collect a draft pick if he signs elsewhere.
Cincinnati has a few promising young arms that could potentially replace Bailey in the rotation. Last year, left hander Tony Cingrani debuted with spectacular numbers -- 2.92 ERA with 120 strikeouts and just 43 walks in 104⅔ innings -- and righty Robert Stephenson is expected to be even better by some evaluators. The club also has control over Johnny Cueto, Mat Latos, and Mike Leake through the 2015 season.