ROTISSERIE: Optimal Keepers and Profit

How do we make optimal keeper decisions?

What is an “optimal” keeper?

The term “optimal” can have different meanings in different contexts. For our purposes, we mean something very specific: The keeper that maximizes the most real dollar profit.

Often, fantasy players are torn between different considerations when faced with keeper decisions. In a few cases, the decision is very simple, but often weighing these considerations against each other makes the job difficult. 

For purpose of this essay, we assume a relatively common set up of keeper rules:

  1. You buy a player for $x at the auction.
  2. In his second year you can keep him at that salary.
  3. In the third year you either renew him at that salary for one year, at which point he goes back into the auction pool in year four. Or, you sign him to a long-term contract that increases his salary by $5 each season.

All keeper decisions are context dependent, so if your league’s rules are different (for example, if your league has “topper” rights, or if, at the end of a long-term deal you can add one final season for an additional $10), then these are very important considerations and you need to make adjustments. 

Optimal = Maximizing Dollar Profit

You may read this and think that we mean fantasy profit. And in some sense we do. But in a more important sense, we mean actual dollars.

Usually a fantasy player’s fantasy profit (“FP”) and your actual dollar profit (“DP”) will track together. But in many cases they do not.

Let’s presume you are the proud owner of a $1 Joe Keeper, who you purchased in 2011, and now you have to decide whether to renew him or sign him to a long-term contract. Many will sign him long-term. But that is the wrong decision if you want to win right now.

In a league with a $1,000 First Prize, $500 Second Prize and $100 Third Prize, you might consider the problem like this:

  1. Keeper is projected to average $25 production per year over the next three years.
  2. So, if he's simply renewed at $1, he turns a profit of $24, but then zero over the next two years.
  3. A long-term deal at $16 generates a FP of $27 over three years.
  4. Therefore, the right decision is to sign him to long-term contract.

If you are building for the future this is likely a fair calculus. But this is only because the DP of a rebuilding team winning a cash prize in the rebuilding year is probably small. For illustrative purposes, let’s say that Keeper and his $9 FP increases your chances of each cash prize by 5% for First, 10% for Second and 15% for Third. The cash value of each gain is $50, $50 and $15 or $115.

But if you want to win this year, you must renew Keeper at $1 and let the chips fall where they may. If a $9 FP increases DP at the rates above, then we can roughly assume a linear progression for this purpose. At a $24 FP ($25 production vs. $1 salary) Keeper will increase your chances at First by 12% Second by 25% and Third by 40%, approximately. If you think these chances are too high, just substitute the name Mike Trout (OF, LAA) for Joe Keeper and we see that it is probably a fair assessment.

So, the actual DP gained by renewal is $120, $125 and $40, or $265 total. It is a rout.

Of course we do not expect such rigorous calculation, nor is this the full calculation; you have to consider the extra fantasy salary in year two and three from a long-term contract, compared to what you can get in the auction and the FP for each dollar spent at the auction. But this is the right way to think about the problem.

Opportunity Cost and DP

The second item to consider is the opportunity cost. Signing Keeper to a long-term contract bears opportunity cost in the form of FP gained during an auction. If you are bad at auctions then the opportunity cost might warrant a long-term contact. But in most cases, the astute fantasy auctioneer will do better by having money available in the auction. This is doubly true if you want to win right now.

Keeper’s marginal cost is $15 per year (the difference between a long-term salary and renewal) over the next three years, which is a heavy opportunity cost when compared to $25 projected fantasy production. A $9 FP is not chopped liver, and for a rebuilding team this can be a solid building block. But the scenario we have here is a win-now team, and here the opportunity cost again comes down to DP.

At a $1 renewal salary, we have an extra $14 to spend during the auction. For a good auction player we can assume a 25-33% FP overall on an auction. So, we assume that overall FP equates to per unit FP for illustrative purposes. That 25-33% per dollar FP now has to be translated to DP. And as long as dollar profit is positive it is added to the already strong evidence above that DP is far higher on renewal.

As a technical matter, every keeper decision must be analyzed in terms of DP and not FP. In many instances they are equivalent, but at the extremes of the spectrum (cheap and expensive prices) they can differ considerably. And here is where the fantasy auction player almost always fails to think of DP rather than FP.

Pulling it all together

In sum, follow these rules:

  1. Never sign any player to a long-term deal that makes his salary more than $10 higher unless FP will be greater than the opportunity cost discussed above.
  2. If you want to win this year, sign no long-term contracts unless the DP is sufficiently high.
  3. Never sign a pitcher whose auction price is over $10 to a long-term contract. The DP here is almost never worth it.
  4. When in doubt, if you are a “win-now” team make every decision in favor of minimizing opportunity cost by having more money available at the auction. The only time to deviate from this is if the player pool makes it obvious you will not have a 25-33% profit at the auction. 

Too often, fantasy players only think about FP. Or, they are too risk averse, choosing the “sure” $27 profit of a long-term deal versus the $24 in a one-year renewal. Or, perhaps the worst of all, they are concerned what others will think about the move, and that his cronies will consider him a fool for not signing Keeper to a long-term deal. In all cases, the extra DP should make the fantasy owner feel a lot better about making the right decision.

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  For more information about the terms used in this article, see our Glossary Primer.