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Trading Paces

December 1, 1997

This is the first in a series of fantasy basketball strategy essays, specifically focused on the Smallworld Hoops game. I won't be assessing basketball talent or trends - each manager will have to make his or her own judgments. What I will do is suggest strategies to optimize the more technical aspects of the game, with specific emphasis on trading strategies.  Occasionally, the arithmetic may get a bit involved, but I will try use examples as much as possible to keep it understandable. My 12 year old son read this first column, and he understands it. (So the pressure's now on, eh?)

In this inaugural essay, I'll discuss the pace at which you should "spend" your most important managerial resource - your allotment of 50 trades.  And I'll alert you upfront - my conclusion may not be what you would expect.

It is tempting (and perhaps even addicting) to start the season with a flurry of trading. A recent review of the top 50 Smallworld teams indicates average trading activity of 22 trades after roughly 1/8th of the season. For those of you who are math-challenged, that's equivalent to using up 44% of your trade capacity in just 12% of the season. Meanwhile, intuition suggests that you should spread your trading evenly over the season. Will these active traders crash and burn? Will slow and steady really win the race? 

Before answering, let's consider the purposes of trading. The obvious one is to improve the expected statistical output of your team. You do this by buying a player who will contribute more Smallworld Points (SWP's) than the sold player would contribute. But there is another important reason to trade, and that is to generate growth in your team roster's value. These two purposes do not necessarily lead to the same trading activity. Let me illustrate the difference by way of an example. 

Suppose that on November 12th I sold Shawn Kemp for $8,840,000 and bought Kobe Bryant for $750,000. I didn't do this because I thought Kobe would generate more SWP's than Shawn; in fact, barring injuries, I'd expect the opposite will be true. (So if this were the last trade I expected to make this season, it would have been a stupid trade to make.) Instead, I made this trade because I expected Shawn Kemp's price to fall, and I expected Kobe's to rise. So far, so good. Kemp's price is now $8,120,000, while Bryant's is up to $3,850,000. The trade has increased my roster value by a cool $3,820,000 over what it would have been if I didn't do the trade.

Before moving on, let's think for a moment about the best way to value that trade. I just described it as having gained $3.82 million, but is that really the best way to quantify it? If the objective of the game were to accumulate the most wealth, then perhaps $3.82 million is the best measure. But what defines success in this game? It's not wealth, but SWP's. Of course, building wealth should lead to increased SWP potential (if it is wisely spent). But the real value of the trade is the extra SWP's it can fund, and not the dollars alone. 

This may seem like a trivial point, but it leads to a critical fact that is often overlooked. Again by example, let's say that I now sell Kobe. I could choose to buy Shawn Kemp again, and that would leave me with the net trading profit of $3.86 million in cash. Or, I could spend the extra cash and buy Gary Payton for $11,940,000 (by combining the $3,850,000 from selling Kobe with the $8,090,000 of cash left over after the first trade). Compared with Shawn Kemp, Payton increases my expected point production by about 10 SWP's per game. (Kemp is averaging about 35 SWP/game, while Payton averages close to 45.) Since roughly 70 games remain in the season, this trade has an expected value of 700 SWP's (multiplying 10 by 70). If I were to do the same trade at the midpoint of the season, the value would be only 410 SWP's (10 SWP/game times 41 games remaining). In fact, unless relative player pricing changes dramatically over the course of the season (and don't bet on it), the marginal value of a trade tends to decline as the season ages. So, that's my first reason for doing trades early - all other things being equal, early trades are worth more than late trades. But that's not the only reason.

If you're familiar with the Smallworld player pricing process, you know that "buy" trades cause a player's price to go up, and "sell" trades cause it to go down. The more a player is bought, the higher his price goes, and vice versa. You should also be aware that trading activity tends to be higher early in the season. Part of the reason for this is that early trades tend to be worth more, as I just illustrated. Part of the reason is that many managers get addicted to trading, and just can't slow down. Also, some managers start fast, but lose interest as the season wears on. And part of the reason is because there is greater uncertainty about each player's value early in the season, since it takes awhile to observe the impact of age, new teams, new rules, new coaches, rookies, etc. This uncertainty leads to more frequent trading, as managers try to dump their early season disappointments and pick up undiscovered treasures. All of this early trading causes prices to swing more wildly than they would if trading activity were reduced. Bigger price swings lead to bigger profit opportunities. The process almost feeds on itself. Hence, my second reason for trading early - early season price volatility produces greater profit potential.

Of course, trades are a scarce resource. Ultimately, each manager either runs out of trades, or gets down to a number that he or she must retain in case of an injury. And so, trading activity slows down, and price volatility is reduced, and profit opportunities are reduced. And even if you make a trade, its SWP value is reduced because there are fewer games remaining. So, if you have saved too many trades until later, you are likely to find that you can't improve your team by as much as you might have earlier in the season.

Does it makes sense to save some trades in case you have a key injury? Of course. But how many critical injuries do you expect to have? Also, consider that a late season injury isn't nearly as costly as one which takes a player out for most of the season.

Consequently, my conclusion is this. If saving your trades gives you peace of mind, and if knowing that you have the resources to offset almost any calamity that comes your way, then by all means, save them. You probably won't win the game, but you'll feel much better about yourself. However, if you want to win, then exploit opportunities as they arise. Make smart use of your trades, but take full advantage of early season volatility. As you get down to your last dozen or so, make sure you're buying players who you want to keep for the rest of the season - preferably predictable, high output players. Reserve only a few trades for disaster protection. If you have too many disasters, you're not going to win anyway. Besides, it's only a game. Enjoy the moment!

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Hoop Pointers is written by Dave Hall (a.k.a. the Guru), an avid fantasy sports player. He is not an employee of any of the fantasy games discussed within this site, and any opinions expressed are solely his own. Questions or comments are welcome, and should be emailed to Guru<davehall@home.com>.