Bankroll Management for Daily Fantasy Sports

Bankroll management is a subject mentioned in every strategy
and/or tips page on this site. For a winning player, it’s one of
the most important concepts in the game. This page goes a little
deeper into the subject than those other pages.

The most important thing to understand about bankroll
management in daily fantasy sports is that no bankroll
management strategy will turn a losing player into a winning
player. Forget about betting strategies like the Martingale,
where you raise your bets when you’re losing in an attempt at
recouping your losses. That kind of nonsense doesn’t work.

The first thing to learn is how to win. Then look at what
kind of return on investment you can expect if and when you do
become a winning player. Based on that, maintain a bankroll
that’s separate from your living expenses and that’s also large
enough to cover the contests in which you want to play.

Here are some guidelines for managing a daily fantasy sports
bankroll.

How To Win Money in Daily Fantasy Sports

Before someone can understand how to manage a bankroll, they
need to understand how to determine whether or not they’re a
winning player. For the purposes of this discussion, we’ll
define a winning player as one who expects to make a profit.
That means more than just winning. It means winning often enough
to compensate for the commission the site takes.

Here’s how most daily fantasy sports sites structure their
contests.

• They charge an entry fee.
• They keep 10% of those entry fees.
• Then they put the rest of the money into the prize pool.

Let’s look at how this works, using an example of a
head-to-head contest (a fantasy sports contest with only 2
players).

• Two opponents each pay a $10 entry fee.
• The site takes the $20 in entry fees and keeps 10%, or
  $2.
• The other $18 is the prize pool.

If a player wins these kinds of contests exactly half the
time, he’s going to lose money in the long run. That’s because
half the time he’s going to see a net loss of $10. The other
half the time he’s going to see a net win of $8. His expected
value for each of those situations is -$1, because over time,
he’ll lose $1 per contest.

Here’s an example to show how we can calculate that.

• A player enters 100 contests.
• He spends $10 entering each of them.
• He pays a total of $1,000 in entry fees (100 x $10).
• He wins half of his contests (50).
• He wins $900 from those contests (50 x $18).
• His total loss is $100 ($1,000 in entry fees less $900
  in winnings).
• Divide that loss by 100, and you have an average of $1
  loss per contest.

Your goal, if you want to be a winning player, is to win a
high enough percentage of these contests that you not only break
even, but you show a profit at the end. In order to break
even—given the standard commission structure—you need to win
55.56% of the time. Every percentage point better you do equates
to a higher profit.

Here is another example.

• A player enters 100 contests.
• He spends $10 entering each of them.
• He pays a total of $1,000 in entry fees (100 x $10).
• He wins 56% of his contests (56).
• He wins $1008 from those contests (56 x $18).
• His total profit is $8 ($1,008 in winnings less $1,000
  in entry fees).

If the above player could get his winning percentage up to
60%, his profit would go up significantly. 60 times $18 is
$1080, for an $80 profit. That’s 10 times as much profit. His
winning percentage only improved by 4%, but the amount of money
he wins on average goes up by 1000%.

The lesson to take away from this?

Every 1% of your winning percentage matters.

A lot.

Return on Investment

Investors and professional gamblers look at their return on
investment over a given period of time. This is the amount of
money they get back compared to the amount of money they
invested. When you’re playing poker or daily fantasy sports,
your buy-ins represent your investment. Your profit represents
your return, but it’s expressed as a percentage.

In the earlier example, where the hypothetical player wins
56% of the time, he saw a return of $8 on a $1,000 investment.
That’s a 0.8% return on investment. If you invest in real estate
or the stock market, that might sound awful. But it’s better
than you think.

The other component of return on investment is the time
frame. Most investors are thrilled to earn a 10% return on their
investment… over the course of an entire year. Since you’re
seeing a return on investment of 0.8% per day, if you look at it
on an annual basis, you’re doing great. If you play every single
day, you’ll earn $2,920 in a year from playing fantasy sports.

That’s an amazing return on a $1,000 bankroll, and it doesn’t
take into account compound interest. Compound interest is a
fancy phrase for the effect of reinvested returns has on your
bankroll.

Here’s a simplified example.

• Suppose you win just enough to see a $10 profit on a
  $1,000 bankroll.
• After one day, you have a bankroll of $1,010. You can
  enter an additional $10 contest.
• So the next day, you’re able to win an average of $10.10
  instead of $10.

That doesn’t sound like much, but pile those returns on top
of each other. Soon your money starts to double faster than you
can imagine.

But return on investment doesn’t matter if you have a bad
week and lose some money because of bad luck.

Minimum Boldness & Maximum Boldness

Suppose your goal is to come as close as possible to doubling
your money in a fantasy sports contest. The strategy used would
differ based on your skill level. If you’re not an expert,
you’re more likely to double your money by playing in one large
contest with one large entry fee. That’s because you might get
lucky.

Let’s say you’re smart but inexperienced, and you estimate
that you only have a 40% chance of winning. That chance of
winning doesn’t go up when you enter multiple contests. So if
you want to double your money, you have a 40% chance of doing so
in one contest.

But if you enter 2 contests, you have to win both of them to
double your money. The chances of winning EACH contest is 40%,
so your chances of winning 2 contests is 40% multiplied by 40%,
or 16%. If you enter 3 contests, you still have to win all 3 of
them to double your money. Your chances of winning 3 contests in
a row are a little over 6%.

Would you rather have a 40% chance of doubling up, or a 6%
chance?

Betting an entire bankroll on a single contest is an example
of a maximum boldness strategy.

For winning players, though, it’s a whole different ball
game. Let’s assume you’re not going to win 40% of the time—let’s
assume you’re only going to lose 40% of the time. Now you’re
going to win 60% of the time.

What are the odds of going broke if you put all of your money
on a single contest? 40% is a big number if you’re hoping to be
a professional fantasy sports player.

But what happens to the chances of going broke if you split
your bankroll into 2 contests? The odds of going broke drop to
16%.

You have to lose both contests to go broke—if you only lose
one, you can stay in action—even though your bankroll took a big
hit.

The more contests you participate in, the lower the odds of
going broke become. Also, the odds of taking a big hit to your
bankroll go down, too. Suppose you’re playing in 100
tournaments. Chances are you’ll lose 40 of them, but even if
you’re unlucky, you probably won’t lose more than 50 of them.
Your bankroll in that situation takes a small hit, but it’s
still sturdy.

This approach of only investing a small percentage of your
total bankroll into each contest is called a minimum boldness
strategy. It’s the approach that anyone with an edge should
take. You’re counting on your edge over the other players to
kick in over time. This is the same strategy that keeps large
casinos in business. A roulette player might have a 47% chance
of doubling up if she only makes one bet, but how often does she
only make a single bet?

The rest of this bankroll management advice only applies to
winning players.

Bankroll Considerations for Cash Games

Grinders are daily fantasy sports players who stick to cash
games such as 50/50s and head-to-head contests. The chances of
winning are theoretically 50%, but experts counting on their
greater skill and discernment lock in a profit over time. We
demonstrated how the math on that works in those earlier
examples based on a 56% winning percentage and on a 60% winning
percentage.

But those winning percentages are based on the long run. In
the short term, anything can happen. A player who has a long
term expectation of winning 60% of the time might win only 30%
of the time in a given week. This is called standard deviation.
It’s also called bad luck.

Over time, actual results should start to resemble expected
results, but you have to maintain a large enough bankroll to
withstand the vicissitudes of luck.

You should probably maintain a bankroll large enough to
handle 20-40 buy-ins if you’re specializing in 50/50s and
head-to-head games.

Here’s an example.

• You have a bankroll of $1,000.
• You’re also conservative, so decide you want to have 40
  buy-ins.
• You stick with 50/50s and head-to-head contests with a
  buy-in of $25.

If you’re a little more aggressive, you might play with half
as many contests but twice as much buy-in. Instead of playing 40
contests at $25, you’ll play 20 contests at $50 each.

Bankroll Considerations for Tournaments

Tournaments require a more conservative approach, because
even if you win often enough to be profitable, you’re still
going to win less often than cash game players. This is because
there are a smaller percentage of winners, although this is made
up for with higher payouts.

Here’s an example to highlight what we mean.

• You like to play in the 100 player tournaments with the
  $25 buy-in.
• The prize pool for these tournaments is $2,250.
• Only the top 12 places pay—the other 88 players lose
  their entry fee.
• First place gets $625, second place gets $375. The
  minimum payout is $75.
• If all entrants are of average skill, you only have a
  12% chance of hitting a payoff.
• If you’re twice as skilled as the rest of the playing
  field, it’s a 24% chance.
• So even if you’re a really great player, you’ll see a
  lot more losses than wins.

The wins will be big enough to make up for having less of
them, but the trick is making your bankroll last long enough for
the mathematical edge to kick in. A conservative player might
settle on having 120 buy-ins, but if you’re not especially risk
averse, you might go as low as 60 or 80 buy-ins.

That means if you want to play in the $10 tournaments, you
should have a bankroll of at least $600. If you’re conservative,
you might even play $10 tournaments on a bankroll of $1200.

The nice thing about tournaments is that if you hit your
winning games early, you can see dramatic increases in your
bankroll right away.

But keep in mind that the correct strategy for actually
playing the tournament differs from the correct strategy in
50/50s and heads-up contests.