Trades in the Context of Inflation - A Roto Puzzle

This past week, an owner presented me with a trade proposal that created quite the roto puzzle for me to solve. I share it with you here to put some of our analysis to the test with regard to inflation in keeper leagues and its effect on the value of your team.

Owner A offered Mike Lowell at $8 to Owner B for Alex Rios at $27 (contracts aren't relevant to this analysis, as both players are S1s). As brief context, Owner A has a very strong freeze list; he asserts it is 15 deep (the limit for this league), though freezes 13-15 are what I refer to as "shrug" freezes (if he kept them, fine, and if not, fine also). Owner B has an adequate freeze list, but does not have a significant amount of value locked into his team. Third base is a relatively weak position, and many third basemen will be locked up prior to the auction.

There is no question that this is a very fair proposal. At first glance, it looks like this is a no brainer...$8 third baseman for a $27 outfielder...sweet deal for Owner B. As we have all learned, however, no trade is safe from our analytical eye. Taking a closer look, we can see how the debate over whether to accept this offer developed.

From year to year, this league averages about 20% inflation. So the crucible in which to place our analysis is: how do we value Rios and Lowell, and is the savings in salary sufficient to purchase back the lost stats (with a profit if you are Owner B)? In other words...can Owner B give up an inflation hedge like Rios and yet increase his team's overall value?

Owner A believes that Lowell is a $17 player and Rios is a $30 player. If this is true, Lowell would turn a $9 profit and Rios would turn a $3 profit. Again, this appear to be a no-brainer for Owner B - save $19 and turn a $9 profit on Lowell. What, however, can Owner B buy back in the auction? The $19 savings in the auction will buy about $15.83 (let's round up to $16) in stats (applying 20% inflation).

The $19 in salary savings is essentially the "hypothetical player to be named later" in this trade, and is often forgotten in trade analysis. Pure salary savings is not the end of the discussion on trades; at some point, you need to spend the salary savings in the auction, and, depending upon your level of inflation, the trade may or may not be worthwhile.

In the example above, assuming Owner A is right and Lowell will return $17 in stats, Owner B is getting an advantage. He gets $17 in stats from Lowell, plus $15.83 in stats from our hypothetical player, for a total, rounded, of $33. The trade is a net $3 gain for Owner B.

Owner B, however, believes that Mike Lowell is a $15 player. Owner B also believes that Alex Rios is a $33 player. If that is the case, then Owner B should not make this trade, as Owner B will only be getting $31 back in stats (from Lowell and salary savings spent in the auction) in exchange for Rios' $33 in stats, taking a $2 loss.

Of course, this analysis does not take into account things like age, injury history, position scarcity, speed versus power, etc. In any trade involving such narrow value margins, you should take all of these things into account.

In the end, Owner B decided not to make the trade, and Owner A made another trade, moving Mike Lowell to Owner C (with a draft pick) for David Murphy at $2. Looking at this trade in the context of the first proposed trade, Owner C obtained a value advantage here. Not only did Owner A lose value (depending, of course, on how you value David Murphy), but he gained additional auction dollars subject to inflation. If you believe that Lowell is a $17 player as Owner A does, Murphy, at the very least, needs to earn $12 to make the trade a wash. This does not take into account position, third base being quite thin in this keeper league, and does not take into account the inflation hedge that Rios would have been in the first proposal, essentially locking up double the stats of Lowell.

Making these types of calculations a part of your fantasy toolbox is a key component to maximizing your off-season value. Be sure you have a calculator/spreadsheet and a lot of patience; speaking from experience, it takes awhile to master the math...doing so, however, creates a distinct trading advantage.