Daily Fantasy Football: Balancing Risk and Reward on Your Way to Profitability

Daily Fantasy Football: Balancing Risk and Reward on Your Way to Profitability

By Jonathan Bales (Daily Fantasy Expert), last updated Aug 16, 2013

Jonathan Bales's picture

Jonathan Bales is a DraftKings Pro and the author of the Fantasy Football for Smart People book series. His latest book, How to Win at Daily Fantasy Sports, is a data-driven guide to winning on DraftKings. He is also (unofficially) sponsored by GrubHub.

Follow Jonathan on Twitter: @BalesFootball.

I was pretty excited when Josh Moore asked me to be the Lead Daily Fantasy Writer for 4for4 because 1) I’ve begun to dedicate more and more of my “fantasy time” to participating in daily leagues and 2) I recently wrote a book on daily fantasy football. So I got that going for me, which is nice.

So at this point, the big question for some of you is “Uh, cool, but what is daily fantasy football?” Daily fantasy football involves real-money leagues that last for just a single week of the season, sometimes involving games in just a single day. Each NFL player has a salary, and owners select a lineup of players whose total salaries fit under a predetermined salary cap. Owners then compete in leagues ranging from two participants to thousands, wagering anything from nothing to hundreds of dollars per contest. The best lineups at the end of the week take home the prizes. A simple idea with lots of little intricacies that we’ll uncover along the way this season. You can check out site reviews to our favorite daily fantasy sites here: DraftDay, DraftKingsDraftStreetFanDuel or StarStreet and you can even get a free 4for4 subscription by opening a new account at DraftDay.

The primary reason I’ve shifted much of my attention to daily fantasy is that I view it as an awesome investment tool. If everything goes as planned, the industry is on the verge of exploding in much the same way as online poker did several years ago. If that happens, daily fantasy sites will be flooded with novice owners looking to get in on the action. And guess what? We—the 4for4 community—are going to be the ones sitting there to take their money.

Because I view daily fantasy primarily as an investment, everything I propose in my articles will be a function of risk and reward. Every tip about money management, league selection, projections, lineups—everything—will be provided with the ultimate goal of increasing upside while limiting exposure to risk.

And I’m going to put my money where my mouth is. Josh has agreed to stake me a couple grand to use on daily fantasy sites this year. I’m going to record the experience here at 4for4, taking you through my thought process, selections, and results each week. So technically I’m putting Josh’s money where my mouth is. Like I said, I like to limit risk whenever possible. There’s no better way to do that than to use someone else’s money.

Below, I’m going to touch on four fundamental aspects of daily fantasy strategy: money management, league selection, projections, and lineups. All of them are essential to your success as a daily fantasy owner. At the end of the day, if you’re making accurate projections—as the guys at 4for4 do so well—picking the right leagues, optimizing your lineups, and astutely managing your money, you’ll be profitable as a daily fantasy owner. Let’s get rolling.


Money Management

Here’s the first and most important truth in daily fantasy: if you don’t properly manage your money, you’ll either go bankrupt or leave a lot of potential profit on the table. It’s absolutely as important as who you pick and which leagues you enter. Now, Josh told me not to spend an inordinate amount of time discussing money management because, frankly, it’s boring, so I’ll leave you with a sample from my book:

         Being Flexible on Total Money In Play

In addition to your willingness to take on risk, the nature in which you formulate your weekly lineups will dictate the size of the money you put into play. Namely, if you add the same players on multiple teams, the volatility of your total buy-in amount increases. If you theoretically used the same lineup for every team and wagered 25 percent of your bankroll, for example, a very poor week could legitimately leave you with no returns for the week, depending on your league structure. On the flip side, if your player selection is very diverse, i.e. the same players aren’t on multiple teams, you can increase the amount you place on each lineup.

Remember, your goal as a fantasy owner is to increase upside without significantly increasing risk. Thus, the relationship between player selection and total buy-in size should be an inverse one; the more you diversify your lineups to limit downside, the more money you can place on each team to subsequently improve your upside.

          In the Bonus

There’s no easier method by which you can accrue profit while playing weekly fantasy football than by unlocking bonuses when you deposit money. Take advantage. Some sites offer ridiculous bonuses on your first deposit and that can turn into a hefty sum of cash if you play your cards right. The big initial bonus offered by most weekly fantasy sports sites is a major reason to deposit your whole bankroll right from the start. If you say to yourself, “I’ll deposit $1,000 now and $1,000 later,” you could be missing out on a sizeable amount of bonus money. You’ll need to earn your bonus by participating in leagues, but as long as your money management is on point, you should have no trouble unlocking the entire initial deposit bonus.

That latter point is an important one; you want to get your hands on as much free money as possible. That means entering tournaments with overlay—“extra” money that the sites put into the total prize pool—and capitalizing on bonuses whenever possible. You should also search for sites that charge a low rake to play, have great incentives, and a bunch of other stuff that I’ll hit on along the way.

It's also important to note that there's a difference between the buy-in size for one league and the total amount of money you put down in a given week (we'll call that "Cash In Play"). Your single-game buy-in size doesn't necessarily change (or even matter that much, assuming you're getting enough action to hedge against a sub-par week), but you do need to really monitor your "Cash In Play." Namely, if your total "Cash In Play" is too high, you'll risk going bankrupt in a hurry.

"Cash In Play" can fluctuate depending on how many different lineups you use, but it's never a great idea to wager more than around 40 percent of your total bankroll in a given week, regardless of how you diversify your lineups. Most weeks, you should find your "Cash In Play" falling between 20 and 40 percent. Again, the more lineups you use, the higher that percentage can be (but don't forget that as your total lineup number increases, optimal player usage necessarily decreases). If you're using just a single lineup, you really can't afford to have more than one-fifth of your bankroll in play.

Ultimately, your goal when managing your money is to stay in the game while maximizing profits. If you’re a long-term winner, you want to manage your money in such a way that your advantage can arise. If you’re a long-term loser, you’ll want to know that too so you can improve. If you’re placing 20 percent of your bankroll on a single team, you’ll go bankrupt before you can make any sort of determination whatsoever. Also, now you have no money.


League Selection

There are a number of different types of leagues in daily fantasy, but we can sort them into three basic categories: head-to-head, tournament, and 50/50. A head-to-head league is pretty self-explanatory; you face off against a single player, and the top score takes down the prize. Heads-up leagues offer safety—a top daily fantasy player can win 65 percent or more—so they should be the foundation of your league selection.

On the other end of the spectrum are tournaments, or large-field leagues. Tournaments can have hundreds or even thousands of participants. You can’t overdo it on tournaments because your probability of winning will be small; if a site pays out the top 10 percent of lineups in a tournament, even an expert might see a return in just one-fifth of all leagues. If you manage your money properly, though, tournaments can offer amazing returns because there are so many novice owners in them.

The other primary league type is the 50/50. A 50/50 league can have any number of owners, but it always pays out the top half of scores. It can be both safer and more volatile than head-to-head leagues, depending how you utilize it. From my book:

The reason that a head-to-head league is safe is that, since there are only two owners, an above-average weekly score makes a victory likely. In a three-team league, you almost assuredly need an outstanding score to win. In a five-teamer that pays out just one person, you simply won’t be in the money without a well above-average week. In all three leagues, you can have an elite week—in the top five percent, even—and lose. That increases the volatility of even small leagues.

In a 50/50 league, on the other hand, great scores are always rewarded. Whereas a score in the 95th percentile could theoretically fail to provide a win in a head-to-head league, such an atrocity will never occur in a 50/50 league. In effect, a 50/50 league is a giant head-to-head matchup in which astute selections are (nearly) always rewarded and poor ones aren’t. It’s like Barry Bonds against Roger Clemens: a head-to-head matchup on steroids.

And the more people in your 50/50 league, the safer it becomes. Think of it like this; the range of possible fantasy football scores in a given week falls on a bell curve. In a large sample, a few scores will fall on one end of the curve, and a few on the other. Most scores won’t be outliers, however; they’ll be situated somewhere near the middle of the curve. In most instances, you’ll be somewhere near the middle of the distribution of possible fantasy scores (hopefully closer to the high end than the low end), and a 50/50 league makes it improbable that outliers will beat you. The more people in the league, the closer the distribution of scores will resemble a bell curve and the more likely it will become that your great score gets rewarded.

However, 50/50 leagues can be quite volatile, too:

In any given week, you’ll have an optimal lineup; the best of the best values that you’ll want to start as much as possible. If you were to start that same lineup in multiple head-to-head leagues, chances are you’d win some and lose some. Thus, head-to-head leagues are safe whether you start 100 different lineup combinations or just one; if you finish in, say, the bottom 25 percent in a given week, you’ll still beat one-quarter of all lineups. In a 50/50 league, however, a poor finish means you simply won’t be paid. Submitting the same lineup in multiple 50/50 leagues is extremely risky; if you have a below-average week, you’ll lose all of that money.

Most daily fantasy sites offer a wide range of league sizes and types, including three-man, five-man, and 20-man leagues. For our purposes, though, daily fantasy strategy can be sorted into three categories—heads-up, tournament, and 50/50—and then applied to other league types as needed.

As the season approaches, I’ll show you how to diversify your league types to maximize profit. The majority of (Josh’s) money that I wager this year will be in either heads-up leagues or tournaments, but I’ll play 50/50s and other league types as I see fit.



The most difficult part of playing daily fantasy is creating accurate projections. But if you have accurate projections, you’re just a few easy steps away from becoming profitable. Well guess what? The guys here at 4for4 work their asses off all year to provide projections you can trust. There’s a reason you see those badges on the right sidebar; fantasy football is about making trustworthy predictions, and 4for4 has a proven track record of just that.

In addition to the site-specific Value Reports we publish here each week of the season, I’ll also try to add my two cents with some ceiling and floor projections. Each player possesses a certain level of volatility from week to week. If we can figure out which players are the riskiest, we can structure our daily fantasy teams in a way that maximizes potential reward. It’s important to remember that it’s not always bad to take on risk, so long as the net expectation is positive.



With projections already in hand, daily fantasy becomes a whole lot easier. I’ll show you how to use those projections to determine player values—which 4for4 also provides—and ultimately develop the optimal lineups. If that isn’t worth the subscription fee right there, I don’t know what is.

Of course, lineups need to be tailored to each specific site. Every daily fantasy site provides different player values, and we need to do our best to exploit undervalued players and bypass overvalued players. So each week, I’ll give you a few lineups that are made specifically for use at a particular daily fantasy site.

I’ll also discuss popular daily fantasy lineup creation concepts, such as stacking.

         Stacking Up Against the Competition

In most cases, the production of your fantasy players will be independent of each other. Unless they’re playing in the same game, the play of your quarterback won’t affect the production of your receiver.

But what if you pair the two together? This strategy—known as “stacking”—is extremely common in the world of weekly fantasy football. By pairing a quarterback with his wide receiver (or two) or tight end, you can construct situations in which the production of one player is dependent on the play of another. That can be good or bad, depending how you utilize it.

If you recall, it’s foolish to place a ton of money on individual lineups because, often times, you choose the same players for various rosters. That means the success of one is closely linked to that of another, and that creates a volatile situation. In terms of money management, that’s bad.

But volatility can also be a positive. In tournaments, for example, you want to choose a high-variance lineup because you need all of the upside you can get. If you’re in a 2,500-man league that pays out the top 250 owners, there’s no difference between 251st-place and dead last. You don’t want “solid” in a tournament. You want outstanding. By pairing a quarterback with his receivers, you can greatly enhance the ceiling of your team by relying on dependent events; if your quarterback throws for 400 yards and four touchdowns, you can bet his receivers will have monster games as well.

Volatility isn’t always welcomed, though, as we’ve seen in head-to-head leagues. When you’re playing against just one other owner, you don’t want to seek upside at all costs. In many cases, you just want to maximize the “floor” of your lineup, i.e. create a safe group of players. That means it’s probably best to select players whose production isn’t dependent on anyone else in your lineup.

Stacking is basically a necessity in tournaments. It’s not so useful in heads-up leagues. There are all kind of similar little strategies that make the best daily fantasy players so good, and I’ll explain those as the season rolls along.


Looking Forward

This is going to be a fun ride, so I hope you choose to join me on it by depositing at DraftDay, DraftKings, DraftStreet, FanDuel or StarStreet (those links go to our site reviews). There’s a lot of money to be made in daily fantasy, especially with more and more players submitting lineups each year. By treating daily fantasy as an investment—making every decision as a function of risk and reward—you can be a long-term profitable player.

If not, buy the book and then get someone to stake you some cash until you figure out what you’re doing.

Filed Under: Preseason, 2013

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