Daily Fantasy Strategy: Heads-Up for the Win

When I was working with FFFC $150,000 winner Peter Jennings to write my daily fantasy book, I was pretty eager to discuss all the tactics he employed to take down the grand prize. Peter talked for a few minutes about his strategy in the championship week (which oddly enough centered around his defense), but the conversation always reverted back to use of heads-up leagues as a source of long-term profit.

Look, tournaments can and should absolutely be part of your daily fantasy repertoire. There’s more “bad money” in those than anywhere else, with novice owners throwing down cash in hopes of the big score. But the problem is, tournaments come with a high variance and little consistency; tournament-only play is not a sound long-term strategy unless you have a huge bankroll to withstand the droughts.

In most tournaments, 10 percent of entrants are paid out. Even if you’re a profitable daily fantasy player, it’s unlikely that you can cash in more than 20 percent of tournaments. If that’s the case, you’ll be in the money one time for every five tournaments you enter, on average. The key phrase there is ‘on average,’ because there are times that even the best daily fantasy players run cold. Even with a 20 percent expected cash rate, it wouldn’t be too long before you enter 15 tournaments without winning a dime. If you’re entering nothing but tournaments and wagering six or seven percent of your bankroll in each, you’ll go bankrupt before you know it.

That’s why we need to use smaller leagues—particularly heads-up and 50/50s—as the backbone of our daily fantasy strategy. The reward is smaller, but so is the risk. And you’ll be able to stay in the game long enough to 1) grind out consistent profits and 2) allow you to enter tournaments without fear of bankroll depletion.

Heads-Up Leagues

If you’re serious about profiting from daily fantasy, heads-up leagues should be the backbone of your league composition. There are two reasons for this: it minimizes risk, and it minimizes risk. Oh, that’s the same thing? No it isn’t.

Minimizes Risk: The obvious way in which you can minimize risk in heads-up leagues is that you’re competing against just one other person, so 50 percent of the entrants are paid. That’s important because one of the primary factors in determining how much money you can plunk down on any single lineup is the percentage of players who get paid. You can wager 15 or 20 percent of your bankroll on an optimal lineup if you place it into heads-up leagues. You can’t do that in a tournament.

Minimizes Risk, Part Deux: The other way in which entering heads-up leagues minimizes risk is that you get paid in a very linear way, assuming you enter enough leagues. By that, I mean that if you finish in the top 90 percent of all heads-up lineups, you’ll win somewhere around 90 percent of your leagues. If you finish in the bottom 10 percent, you’ll likely lose in all but 10 percent of them.

Note that you “get what you deserve” as you play in more and more heads-up leagues. If you submit a particular lineup into just one league, for example, you could win with a bottom 20 percent score if you get lucky and face a really weak opponent, for example. On the flip side, you could lose with a top 90 percent lineup.

As you enter a lineup into more heads-up leagues, the odds of losing with an awesome lineup or winning with a poor one start to vanish. If you could theoretically participate in one million heads-up leagues against different opponents, you’d be paid perfectly according to how you finish. A top 10 percent lineups would win 90 percent of the time, a top 50 percent lineup would win half of the time, and so on.

50/50 Leagues

A 50/50 league—one that pays out the top half of all entrants—has similarities and differences to heads-up leagues. The primary difference comes in the volatility. If we were to track the inherent volatility of each league type based on the number of times a single lineup (the key being a single lineup) is entered into it, this is what we’d see. . .

The reason that 50/50s have low volatility if you’re not entering multiple leagues (or, more accurately, putting down a whole lot of money on them) is because you’ll almost always be rewarded for a dominant lineup and punished for a poor one. You won’t see that same sort of oh-crap-I’m-facing-a-180-point-opponent-and-can’t-win phenomenon that you might in a heads-up league. The more people in your 50/50 league, the greater the probability that your great lineup will be rewarded.

On the opposite side of the coin, entering your optimal lineup into more and more 50/50 leagues doesn’t limit risk like it does in heads-up tournaments. When you enter additional 50/50s, all you’re doing is increasing instability by forcing yourself to have a great week. Yes, you can have monster profits if you have an outstanding lineup, but a bottom 20 percent lineup won’t return anything. If you wager 30 percent of your bankroll on a lineup in 50/50 leagues and proceed to finish in the bottom quarter of teams, you just lost 30 percent of your bankroll. You don’t always have to minimize risk at all costs, but you don’t want so much volatility that a couple of bad weeks will drive you bankrupt.

Splitting It Up

As daily fantasy owners, our goal is to put as much cash on our optimal lineups as we possibly can without unnecessarily increasing our risk exposure. Heads-up lineups allow us to do that because, over large samples, they pay out according to how well you perform. That means the majority of the money we wager this year is going to be in heads-up leagues. That’s the foundation from which we can profit to limit the variance involved in tournaments.

That doesn’t mean 50/50 lineups don’t have their place, however. You can enter 50/50 leagues when you want to increase your volatility (which isn’t always a bad thing). A daily owner who wants to quickly build a bankroll, for example, might want to enter more 50/50s than someone trying to grind out profit, for example. It isn’t a solid long-term strategy, but playing in a high number of 50/50 leagues can help you quickly increase your bankroll (or quickly lose it, too). If the upside of rapid growth outweighs the downside of potentially quick losses, then it might be suitable to wager more in 50/50s.

Typically, though, we’re going to focus on dominating heads-up matchups. And as our bankroll grows, the amount of total money (but not the percentage) we can place on each lineup will also increase. That doesn’t necessarily mean that we’ll be playing at higher stakes, however. In general, it’s suitable to play in 10 leagues at $5 over two leagues at $25 because 1) you “diversify your portfolio” so to speak and 2) you’ll presumably face weaker competition. Bumping up the stakes has value if we can reduce the rake, but that’s a topic for next week.

Until then, fellow daily fantasy owners. . .