Process Points. 16.21.

Lesson of the Week: Your Silent Partner

I’ll have some more traditional “lessons” in my lineup reviews below, but for this part of the article this week, I wanted to touch on something that hopefully all of you will need to consider now or in the future. As you read the great content on OWS and become sharper by the week, eventually, you are likely to have variance swing in your favor and have your EV realized. If/when this happens, there are a lot of things you need to think about and consider. In Sonic’s Marketplace course, one of the things he talks about is “visualizing yourself winning” and what you will do in that situation. That is such great advice, and there are also some strategic and financial things you should be aware of in those situations.

What I am talking about is your “silent partner,” and by that, I mean the government that will tax your winnings. At the end of every year, each website will run the numbers and send a 1099-MISC to any user who profited at least $600 from January 1st to December 31st. The amount of that document will be reported to the IRS and paired up with the information they have on file for you (this is why they require identity verification before withdrawals). The amount of the 1099-MISC will be added to your income for the year and taxed accordingly. Along with that information, there are some things to consider:

• Track your play – I keep a spreadsheet throughout the year documenting where I am at on each site. This helps me keep track of roughly how much additional money I will need to come up with for taxes the next year.

• Plan Ahead!! – If you win a substantial amount of money, make sure you put a good chunk of it somewhere and don’t touch it. I suggest 40 to 50% just to be safe. While most of us won’t actually get taxed at that rate, I’d rather have too much set aside than not enough.

• Losses don’t carry over – Remember, the taxes are calculated based on the calendar year. You can’t use losses from previous years to reduce the amount of winnings from the current year. This is another reason why bankroll management is so important. If you are too aggressive and have a bad year or two, you could finally hit something big and, after taxes, still be down. Also, if you have a losing year in the future, you don’t get any credit for the money you paid in the year before. This is a big deal. Let’s say you won $10,000 one year and your tax rate ended up around 30%, so you paid $3,000 in taxes on your winnings for that year. If you lost $4,000 each of the following two years, you would be up $2,000 over the 3-year span but actually, be $1,000 in the hole. This brings me to my next point, and something important to consider, especially this coming week…..

• Playing at a discount – Once you have won a substantial amount of money and are going to get taxed on it, you essentially have a “silent partner” on that site for the rest of the year. What I mean by that is, from the example above, if you are up $10,000 on the year and fall into a 30% tax bracket – anything you win or lose the rest of the year, the government has 30% of the action on. If you lose $1,000 in Week 16, that means you will pay $300 less in taxes. So basically, the loss is really only costing you $700 (a 30% discount). The reason this is so important is that after Week 16, the next NFL slate is in January 2022 and will no longer have any effect on what you owe for this year’s taxes. There are some really good Week 16 GPP tournaments on both sites. I will have more money on the line than a usual week because these tournaments have such massive (potentially life-changing) money on the line, and I am essentially getting shots at that life-changing money at a huge discount that will expire after this week – and there’s no guarantee I will ever get that chance again.

• NOTE: The above analysis is not me endorsing being fiscally irresponsible or unnecessarily risky. What I am saying is that it is a calculated risk because of the math and probabilities involved. When I can get 30-40% off the entry fee for a tournament that can improve the lives of everyone around me, that is a unique opportunity that I am willing to leverage and take on some additional risk that I know won’t ruin me. 

• Those who are down on the year – Those huge tournaments referenced above….be really careful chasing them if you are down on the year. Yes, obviously there is upside if you win big – and if you are down on the year thus far, the amount you are down will offset some of your winnings for this week. However, we all know how hard winning GPP’s in any given week can be, and if you are aggressively entering those big/expensive tournaments this week and don’t win (the likeliest scenario), it doesn’t help your tax liability if you win big next calendar year. You have a full year of GPP’s ahead of you in 2022, as opposed to one last hurrah for 2021. The odds are that if you are going to win one, it’s going to be in that much larger time horizon than in this specific week. With that in mind, for those who are down, I would recommend playing, at most, your usual amount this week and would even say you may be better off lowering your level of play this week and using it as more of a “research and absorb” type of week. You can put yourself ahead of the game for Week 17 by thinking ahead and having a grasp on that slate ahead of time rather than just starting to figure it out next Monday like everyone else. Then you’d have a “silent partner” for the rest of 2022 if you hit something big in January. This is what happened to me last year, as I was down a decent amount on the 2020 season until my $200k win in Week 17, which was on January 3rd, 2021. Since then, I have known that I have been playing with a 30-40% “silent partner.”

Hopefully, some of you reading this already have a “silent partner” for this year, and for those of you who don’t, hopefully, this is some evergreen material for you to consider when that EV is inevitably realized. Being prepared for success and understanding what it means in the short and long term is critical to maximizing your expected value and avoiding any unnecessary headaches down the road.

Lineup Reviews 

As outlined in my +EV Primer course (you can find in the Marketplace – either by itself or in the bundle with my player pool course), one of my approaches that keeps me from getting too high or low week-to-week is playing consistent contests and approaching them from a season-long perspective and using that to evaluate my play and ROI. This season, in this article, I will be tracking my progress on a weekly basis as I play the Single Entry (SE), 3-max, and 5-max tournaments in the $20 to $150 price range on DraftKings main slate for all 18 weeks. Rather than sweating or worrying about my ROI every week and “hoping to cash,” – my goal for the season is to maximize profit relative to that long-term investment total. The results of a given week are irrelevant.  

Each week I will review the best and worst of my 11 lineups from my “Roster Block” of SE/3-Max/5-Max. Below are this week’s results and you can find more information about my process/theory for this in my Week 1 Process Points article

Best Lineup ($200k Three-Point Stance, 5-Max, $33):

The “story” I was telling: This was the only lineup in my “roster block” that used Tyler Huntley at QB, something I was very disappointed in myself about. I was very high on Huntley this week and talked him up in my Sunday GPP Thoughts that I shared in the IC Discord. Unfortunately, I didn’t take my own advice enough, and rightfully I paid for it. This lineup happened to have Bateman as Huntley’s stacking partner as he was the cheapest BAL pass catcher and had a big game the week before with Huntley. I’m very high on Bateman as a prospect, so I saw this as an opportunity to “be early” on him, and I included Davante Adams for the game stack. Another reason that I ended up with Bateman instead of Mark Andrews (I never considered Marquise Brown) was that I was very high on Kyle Pitts this week and had the Pitts-Wilson correlation from that ATL/SF game. Devin Singletary is a play I was happy with as he was leverage off a popular Bills passing game, and he had a huge workload. It would have been much better if not for Gabriel Davis having two late touchdowns. The lineup was unique enough that I didn’t mind eating some Devante Parker chalk, and then I had money left to pay up at RB and DEF, which led me to Joe Mixon and Dallas.

Worst Lineup ($200k Three-Point Stance, 5-Max, $33):

The “story” I was telling: This lineup was betting on the Dolphins having a big game, but Devante Parker not scoring the TDs. As JM has explored, the loss of Jaylen Waddle was not likely to significantly change Parker’s role. Albert Wilson had seen eight targets the week before and felt like the most likely person to assume those short targets that Waddle usually gets. At $3,400 and under 1% owned, he seemed like a great way to play Tua, and I also included Gesicki as the most likely player to be catching touchdowns if Parker wasn’t. On the other side, I used Keelan Cole, who was very cheap, low owned, and coming off a six target game. Unfortunately, while the game played out well on the scoreboard, it went the wrong way for me with how the points were scored. The Jets led early, which hurt Cole’s usage, and of the seven touchdowns scored in the game, four were rushing, and one was defensive. The stack was so cheap and low-owned that the rest of the lineup I was able to fill with high-end players without worrying about ownership. 

Week 15 Results: One of ten lineups cashed this week. My biggest mistakes were: 

• Not playing enough Huntley/Rodgers in a game that I was very high on and that I had laid out the strategy angles of being a late-game for very clearly.
• While the lineups like the MIA/NYJ stack above may have made some sense “in a vacuum,” they really didn’t make much sense for this specific week/slate. I really wasn’t very high on any of the high-priced players outside of Davante Adams, and they all had clear paths to downside. On a week where there were a bunch of studs with a lot of certainty around them, building like that would make a ton of sense as you can get that certainty while only needing one thing (that unique stack) to hit in order to really set yourself apart. I really wasn’t very high on Joe Mixon in a tough road matchup and game projected to be low scoring, but I landed on him in five of my ten lineups just because how I built the rest of my lineups (a lot of them around MIA/NYJ or HOU/JAX) led me there. The same can be said about the Najee/Julio pairing. The game had a total of 42, the Titans are a run-first team, Julio has injury concerns weekly, and Pittsburgh will hide Ben if they can. A lot of the plays I made this week could be considered sharp from various angles, but in Week 15, I ended up going to some pretty thin places – in many cases, against my own advice.

Week 15 Investment: $765

Week 15 Winnings: $65

Estimated Yearly Investment:  $14,000 

Yearly Winnings: $5,365