Where in the draft does trading for future picks make the most sense?

When we see an NFL Draft trade go down that involves future picks, typically the pick is 'upgraded' a round. In other words, if you trade away a 3rd round pick in the current year, expect to receive a 2nd round pick the next year. This has been mentioned as a rule of thumb, but it has also been validated after analysis of draft trades (Thaler et al, 2012).

Its been mentioned by me and others that the return on investment from these trades - measures in points on the draft value chart (which, again, all teams use) - is around 174%. But is that across the board, or does it vary by where you trade picks?

I did a little bit of analysis on this. Keep in mind that teams trade up for a reason(s): lower risk, accelerated player development, and synchronization with the team's 'competitive window'

First, here is the return on investment if we take the average value of a round (R) vs the average value of the future year round (R+1):

Trading away a current 2nd Round Pick for a future 1st round pick 178%
Trading away a current 3rd round pick for a future 2nd round pick 121%
Trading away a current 4th round pick for a future 3rd round pick 165%
Trading away a current 5th round pick for a future 4th round pick 108%
Trading away a current 6th round pick for a future 5th round pick 64%
Trading away a current 7th round pick for a future 6th round pick 160%

The chart above shows that the best spot to trade away a pick is either in the 2nd round, the 4th round, or the 7th round. Conversely, trading away current year 6th round picks seems like a pretty good idea.

But let's add some granularity. taking an average of an entire round may not be accurate - there is a wide range of values across a round and we know from history that most inter-year trades end up being about a 32-spot jump:

With this way of looking at it, we see the highest return on investment if you trade from the top of the second to the top of the 1st -- but this is an artifact of the top 3 - 12 picks being significantly overvalued..especially the top 3. After that, we see value peaking in the late 4th round (i.e. trading a late 4th for a future year late 3rd), then declining from there. It bottoms out at the top of the 6th round (i.e. trading an early 6th for a future year early 5th), but it then begins to climb. The highest return on investment in the draft ends up being the last tradeable pick. Teams rarely want a player so badly in the 7th round that they trade away future picks -- they can sign them as UDFAs...but it does happen. Last year, Minnesota ended up trading away the 211th pick to TEN for what ended up being the 166th pick this year. That's a cool ROI of 257% for MIN!

This method is also flawed -- how do you know that the pick is going to be exactly 32 picks higher? What if we buffer the picks at +/-5 spots? If we do that, we see the same patterns, albeit a little more tame with teams trading away those high 2nd round picks. We see value rising towards the late 4th round, falling until bottoming out in the early 6th, then rising again.

Finally, what if we looked at actual value - i.e. the real performance of players based on their draft position. Quite a few analysts have done studies on this very question, and I use Michael Schuckers' work - its a meta-analysis and incorporates the work of others. Anyway, what do these types of trades look like On Schuckers' chart?

Looking at real value, the ROI is a stable 47% - 50% all the way through the mid-to-late 4th round. It then slowly declines through the middle of the 5th round, where it then drops off a cliff. it bottoms out in the middle of the 7th round and then recovers slightly.

So, what does this tell us? First of all, the best value appears to be in the 3rd round, and trading away 4th rounders for future year 3rd rounders is the best deal you can make. In addition, the discount value based on actual performance changes little in the first four rounds.

So, what should teams do with this advice? 1. trade away 4th rounders for future picks with whoever is willing to accept the trade 2. trade into the late 6th and early 7th rounds by giving up future year picks if the right player is there 3. trade down and acquire as many 3rd round picks as possible. 4. trade up toward the 3rd and 4th rounds -- if you end up with too many picks, trade them away for future year picks 5. do not trade away your late 5ths/early 6th round picks for future year picks -- your ROI is low and you're better off taking a player now and developing them.

Finally, let's look at our 49ers last year:

- No. 92: San Francisco → Indianapolis (D). San Francisco traded this selection to Indianapolis for their fourth round (97th) selection and a fifth round selection in 2013 8.6% increase in pick value - bad trade

- No. 97: San Francisco → Miami (D). San Francisco traded this selection to Miami for their fourth round selection (103rd), a sixth round selection (196th), and a sixth round selection in 2013. 11% increase in pick value - bad trade

- No. 103: San Francisco → Carolina (D). San Francisco traded this selection to Carolina for their sixth round selection (180th) and a third round selection in 2013. 172% increase in pick value - excellent trade

- No. 117: Detroit → San Francisco (D). Detroit traded this selection to San Francisco for their fourth (125th) and sixth round selections (196th) 0% increase in pick value - even trade (no future year picks)

With the exception of the fleecing of Carolina, we acquired future year 5th and 6th round picks that don't have a ton of value. However, we wouldn't not have been in position to rip off Carolina had we not made those trades, so they're OK.

With our final trade with Detroit, I'm going to make a value judgment and say that we should have stayed pat at #125 and drafted DE Jared Crick - we needed the depth and his is a solid football player.

This is a FanPost and does not necessarily reflect the views of Niners Nation's writers or editors. It does reflect the views of this particular fan though, which is as important as the views of Niners Nation's writers or editors.

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