Calculating Individual Overlay Value in Large Field Fantasy Leagues
From time to time entries in large field fantasy leagues come up short of what the site was expecting, and provide some extra value called an overlay. There are a couple of different ways to define what an overlay is. In the example of online poker, an overlay happens when the number of entries falls short of building the guaranteed prize amount. This does not necessarily mean that the poker site is losing money on the tournament. Let me explain. Let’s say you have a 10,000 guarantee tournament with a $10+1 entry. The $10 goes into the prize pool, and the $1 is the rake. It will take 1,000 entries for the prize pool to build to the guarantee amount. At 990 entries there is a $100 overlay, and the site will earn $990 in rake. The overlay in this case comes out of the rake earned, and the site still makes $890 for running the tournament. The overlay simply increased the payout percentage. Now if that same tournament only received 800 entries, there would be a $2000 overlay, and $800 in rake. The site would lose $1,200 by running the tournament and I would call this situation a “pure overlay” where the site is actually paying the players to enter the tournament. An overlay should appeal to most profitable players, while a pure overlay can appeal to all players, but I will get to that later.
Individual Overlay Value
To get the extra value received by entering an overlay league you take the amount of the overlay, and divide it by the number of entries. In the case of the 1000 player league with 990 entries you get $100/990 or 10 cents per entry. You are basically getting a small rake reduction. If you are perfectly happy playing at full rake, any reduction should appeal to you, but you are only earning an extra $0.10 of value in the case above. Now take the 800 entry case. The overlay value is $2000/800 or $2.50 per entry. In this case you are playing rake free, and on top of that you are getting paid an additional $1.50 per entry by the site. This type of overlay should appeal to almost anyone who regularly plays and has a decent shot of cashing. The overlay value is a long-term concept. It means if your play was “average” over the long-term you would earn that amount. There are no guarantees, and in the short term you can lose money overlay or not. So when sizing up an overlay, you want the dollar amount to be big, and the number of entries to be small to maximize value. Also, you should look at the overlay value relative to the buy-in. $2.50 of value against an $11 entry is much, much better than $2.50 of value against a $100 entry.
My Opinion: Is the Overlay Big Enough?
This is a bit more subjective, but is based on your skill level. Winning players are willing to pay full rake, so any rake reduction by overlay should drop right to their bottom line profitability. No overlay is really too small for a winning player. Unfortunately, many players are not long-term winning players so the calculation gets a bit tougher. Let’s assume that a player knows his/her ROI is -5% in large field fantasy leagues with a typical 10% rake. If the individual overlay value reduces the rake to 5%, this player now becomes break-even. This type of player should be interested in overlays, and should bite in any situation where a positive expectation occurs. So in a $10 + $1 type league, an overlay value of $0.50 or more is pretty attractive. Players with lower ROIs should be looking for pure overlays where the site is actually paying you to play.
Bankroll Considerations
Entering a league with an overlay is a short-term play that pays back long-term, so bankroll considerations are indeed in play. If you have a small roll, you probably should not enter a $100 league with an overlay, because your chances of going bust are too big in the short term. You should also be comfortable with losing your entry fee in any league that you enter. If you are never comfortable entering $100 leagues, an overlay is not a good enough reason to enter. Your bankroll includes all of your funds already online, and the amount of money you are willing to re-deposit if you lost all of your online funds. In general, your bankroll should be large enough to cover the entry fee multiplied by the number of entries in a league. For a $10,000 guarantee league you really should have a $10,000 bankroll. Most people who enter these types of leagues do not have that kind of bankroll, and as a result people go busto all the time. I personally prefer smaller sized leagues that don’t require massive bankrolls, and where I can get good data quickly on my personal ROI.
_________________________________________________________________________________________________
About the Writer: After much research and preparation, Blinders turned his vision and passion for fantasy sports into the first Daily Fantasy sports site with Salary Cap based games in June of 2007: FantasySportsLive. He is a longtime online poker player and blogger, and the only daily fantasy grinder who was willing to take on Buffalo66 in his multi-sport fantasy challenge. Last NFL Season Blinders went 71-10 on FanDuel alone.