Could fantasy football make you the next ‘wolf’ of Wall Street?

The New York Stock Exchange and fantasy sports. Upon first glance, similarities between these two activities do not pop into the average person’s head — stocks and fantasy sports seem inherently different.

Yet, the idea and thought process behind any fantasy sport played on ESPN, Yahoo, etc., is equivalent to the idea traders use on ShareBuilder, TD Ameritrade’s thinkorswim or Scottrade.

Unlike fantasy sports, stocks are a scary thing for most people. The average student at Pitt is clueless about the stock market, how the market works on a basic level and why people invest their money. I’m no expert, but after two years of investing in stocks, I have scratched the surface and grasped an understanding on how the market functions.

A key financial concept one can apply to most aspects of life is to buy low and sell high. This is not tough to understand. Follow this concept, and you’ll generally come out on top of any financial situation — but this isn’t always guaranteed. Sometimes, the research you compiled about the stock looks great, but it starts to decline right after you buy it.

To correctly determine if a stock’s price will increase in the future — effectively making you money — you have to analyze many factors about a company, such as its most recent earnings report, foreseeable acquisitions, new possible products and upcoming dates determining the release of financial statements. 

This list seems rather lengthy and a bit much for an amatuer stock trader to comprehend, but it’s actually extremely close, if not identical, to the list of things passionate fantasy football players do before draft night.

Turns out that anyone who has played in a fantasy sports league has already completed everything on that list — hopefully somewhat successfully, unless every fantasy season is an upsetting one.

Passionate players in a league will do their homework before draft night. They will research players of choice, read the right magazines and spend hours in front of the television listening to ESPN reporters discuss who will have a standout year. 

All of the fantasy players’ research corresponds to the ways investors determine how a stock will perform. A company’s most recent earning report is akin to looking at LeSean McCoy’s stats from last year — McCoy was the leading rusher in the NFL, which gave him heavy worth coming into this year’s fantasy draft nationwide. 

Of course, previous earnings will not correctly forecast a company’s success rate 100 percent of the time, but it will render an idea. McCoy has not had the year he was projected to have, and therefore, his statistics from last year do not hold much value this year.

This is not to say that confirming every pick on draft night is like clicking the “confirm trade” button on any trading website. But comparable strategies are used in both situations to determine future play in fantasy’s case, and future price in the stock’s case.

The correlation between the two investments does not stop here. In fantasy, if the starting running back gets injured, you are probably not going to be a happy camper. This will make him worthless in trades, effectively making him dead weight on your team.

Just like in stocks, if the majority of your portfolio is in one stock and that stock crashes, you are not in a good position. The key is to get out just before the crash starts to happen, effectively earning money on your investment. In fantasy, if a player is performing outstandingly well out of the blue, chances are you will put him on the market to try and get as much as you can in return.

Loads and loads of research goes into deciding whether or not Jamaal Charles will have a better year than Frank Gore. 

If the same skills apply, one must ask why more interest is not put into deciding whether Netflix will outperform Apple, or vica versa?

Write to Elias at epe1@pitt.edu.