Drafting to trade

Are you getting Wood thinking of another player? (Icon/SMI)

Dereks Ambrosino and Carty have written nice articles on the relative merits of a well-rounded player versus a one-category super-stud. Plenty of writers (including myself) are proponents of drafting players with high upsides. Undoubtedly, one thing to consider when drafting/buying your initial fantasy team is a player’s eventual trade value. Some players, like some used cars models, are more tradable than others. Trade value is often a key component to strategies with super-studs or high-upside players.

The tempting thing is to take these strategies and use them to speculate for “trade” rather than “use” purposes. For instance: You’re sitting in the 20th round of your draft and you already have Evan Longoria at third base, but you see Brandon Wood still out there and you think, “If Wood gets playing time this season, he could easily outproduce some of the replacement-level third basemen in the league or slot in for the owner who has an injured Chipper Jones.” Wood is a high-upside guy that you will almost certainly have no room for in your starting lineup. But, if he breaks out, there should be other owners in your league willing to trade for him. You’re drafting Wood not because he may have use for you, but because he may have value in a trade later on.

Of course the key question in all of this is: What is Wood’s value? Is he worth the 20th pick over, say, Denard Span or not? How much should you consider Wood’s potential value to your team by playing on it versus his potential value as a future trade piece?

To make a trade, there must be what economists call a “double coincidence of wants.” Your team must not only have something the other owner wants, but you must be willing to give up a player that the other owner values more highly than the player he is giving up. You must have too much pizza and not enough beer and your trade-mate must also have too much beer and not enough pizza. Imagine if you conducted your everyday life like that—every time you wanted to buy milk, you’d have to have something the grocery store wanted in exchange (this is why barter economies and wife-swap parties frequently don’t work and why money is so helpful).

The thing with upside players is that if their upside comes to fruition, they are replacing some current starter. If trade markets were “perfect”—with no waiting periods, irrationalities and so forth—then Wood would replace, say, Chipper Jones on some team, but Jones would then be traded from that team’s bench to some other team, replacing, say, Mike Lowell, all the way down the line until Casey Blake ultimately is the starter that ends up on the bench.

The problem is that trade markets aren’t perfect. If they were, a lot more trades would happen throughout the season. So if you have Wood and Longoria on your team and you’ve found an owner with Chipper Jones who now wants to trade for Wood, he’s going to give up a lot less for Wood in the world where he can’t turn around and trade Jones immediately. Of course, you could try to trade Wood to the owner suffering with the previously replacement-level Blake, but he may be out of town (mentally or literally), or unwilling, or Blake’s kid nephew or whatever. Finding trading partners is hard, and sometimes you just have to be happy to find someone willing to give you anything for a player who’s almost surely going to stay on your bench. What’s more, the player you get in return for Wood (say, Geovany Soto, for some reason) would have more value to you if the catcher on your roster that he was replacing was also easily tradable. But he likely won’t be—you might even just have to cut him even though he was above replacement level.

So let’s say in the beginning of the season, you worked on your projections and you think Wood is a player who, if he breaks out, will be better than Jones but worse than the next best third baseman (say, Michael Young). If by that 20th round you’ve drafted a replacement-level player like Blake at third, then Wood could have value in use. But if you’ve drafted someone Wood has no chance to replace (unless there’s an injury), then you’re drafting Wood to trade him, and his value in that case is, I argue, a lot less.

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  1. Jonathan Sher said...

    Your argument about trade markets can cut the other way too. The fact that it can be hard to make trades can also serve to make a player more valuable than his expected production.

    Let’s say, for example, that I draft an extra closer, one I don’t really need to to finish at or near the top in saves. Then, as the season progresses, another owner finds himself in need of saves, a fairly common occurrence in a league like mine (12 owners AL-only).

    There may be other teams beyond mine that have excess saves. But because the trade market is imperfect, some of those team owners won’t make trades, either because there’s nothing of perceived value they can get in return or they are simply reluctant to make a move.

    That imperfect market makes the saves I’m willing to trade a scarcer commodity and more valuable as a result.

    Your analysis fall short because it only considers the affect of the market on demand but not supply.

    Also, while I think you identified a real risk in the example of Brandon Wood, there are many cases, at least in a traditional roto league, where it’s not so black and white. It’s rare in our league for a team to have a valuable player who can’t be on his active roster. What’s far more common is for teams to have excess in some categories and deficiencies in others. Both Wood and Longoria can play in a roto league (one play a corner, the other 3b), But maybe an owner with both has an excess of homers and rbi’s but a deficiency in pitching. At auction, then, the question becomes whether to take the most productive player regardless of whether his production is more than what you need in certain categories. That is a far more useful question.

  2. Dylan said...

    You could also look at this another way as well. You could trade Longoria and keep Wood as your 3b. This year, I drafted Utley and got Hill in round 19. Around June I trade Utley for Jeter since I had just lost Reyes, and though that Hills actual value the remainder fo the year would be alot closer to Utley’s then the preceived trade value of the 2.

  3. Biggy said...

    Of course, the strategy could fail completely and you could draft a guy to trade, but find no trade partners.  Jonathan made a great point:  it more often works that you have an excess in a statistical category rather than a position.  Example:  trading Kung Fu Panda for a closer because I needed saves and was leading the league in batting average.

  4. Dylan said...

    Thats true, but when doing it by positional for middle infielders and catchers, you have to accept taking a slight loss in the trade in terms of actual value, inorder to gain greater value to your team, but you increased on your draft value.

    Kinda works like this, your 20th rounder is producing like a 8th rounder, and you trade him for 11th round value. So, you basically get 11th round value for a 20th round pick.

  5. Biggy said...

    Good point.It’s also a difficult decision on whether or not the 20th rounder is one to keep or one to sell high on.

  6. TCQ said...

    I feel both embarrassed and obligated to point out that the tag line on that picture is a gigantic double entendre.

    If it was inadvertent, that’s pretty hilarious. And, well, if it wasn’t…still pretty hilarious…

  7. Jonathan Halket said...

    Hey all,

    Once I realized I had written a whole article on Brandon Wood, the tagline kinda wrote itself.  Next stop for me, the Catskills.

    Anyway, Jonathan – it is certainly true that have a rare commodity (let’s say Saves) for the trade market increases its value. So speculating on a guy like Andrew Bailey last year and hitting the jackpot is great.  However, I still contend that the inside value will always have a higher ceiling (in the case that you really need saves) than his value to you for use on the trade market (in the case that you don’t).  (Unless there’s someone out there who’s an idiot – which shouldn’t be discounted but also shouldn’t be counted upon).

  8. Jonathan Sher said...

    Hi Jonathan,

    I understand your contention — that inside value will always have a higher value — but I remain skeptical.

    Let’s look at it another way. Trades happen when an owner of one team places a higher value on a player to acquire than does the owner of that player. To use a real world example, Billy Beane routinely trades closers because he knows some general managers place a higher value on established closers than does he.

    So by definition, every trade is made because each party to it believes he is getting something of greater value to him then what he is giving up.
    Why, then, would we assume this truism (if it its one) to fail simply because an owner trades a player he picked up in the first place for trade value?

    Let’s get beyond the abstract to the concrete. I’m participating in an auction, and for simplicity’s sake, there are only two players on which to bid. Player A is more evaluable but is valuable in categories that I have already sufficient strength.  Player B is less valuable but his value is in areas that I have a need. I see no basis for categorically concluding that player B will help my team more than what I might get in a trade of player A. Your argument about an imperfect marketplace constricts supply as well as demand and you haven’t shown that the constriction on the former is any greater than the constriction of the latter.

    Andrew Bailey is outside the scope of my argument since I am taking about selecting players whose value was reasonably known at the time of the auction, not players such as Bailey whose value only became apparent a month or two after the start of the season.

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