The Effect of Overlay on Bankroll Management
It’s no secret that overlay – when more money is given out by a site in a GPP than what’s entered via buy-ins – is a daily fantasy player’s best friend, and DraftKings pushes the envelope when it comes to infusing tournaments with free money.
The primary draw of overlay is that an average player can have a positive expected value. Normally, average players will lose money over the long run because daily fantasy sites collect a certain percentage of all entry fees. When more money comes out of a league than goes into it, it transforms average players into good ones and good players into great ones.
The Hidden Benefit of Overlay
Being +EV is the main reason to take advantage of overlay, but that’s not all that matters. You can have significant overlay and still be very unlikely to cash, for example, depending on the payout structure.
One of the reasons that the DraftKings Super Boosters and certain qualifiers offer overlay is because the payout structure is top-heavy. Users realize that although their long-term expectation might be positive, it can also take a long time to realize that return if the probability of cashing is really low.
Imagine that you’re in a 1,000-man league with $1 million in prizes, but the league doesn’t fill and there’s just $500,000 in buy-ins. That’s sick – a 100% expect ROI for an average player over the long run – but the catch is that just one person gets paid. So the long-term expected value is sensational, but the realistic expectation is that you’re going to lose your entry fee quite often.
This isn’t meant to discourage you from playing qualifiers and other leagues with top-heavy payout structures because, again, your expected value is better in those than anywhere else. Rather, I’m showing that what matters as it relates to overlay isn’t solely the expected value, but also the probability of cashing.
Overlay and Expected Probability of Cashing
To demonstrate how overlay should change your perception of risk, I downloaded my entry history from DraftKings. I looked solely at NFL leagues, tracking how often I finished in certain percentiles. I did this by dividing my finish by the number of entries in GPPs. Note that whether or not there was actual overlay in a league didn’t matter because I considered only the total number of actual entrants, not the capacity of the league. So if I finished 2,000th out of 8,000 entrants, I chalked that up as a finish in the 75th percentile, which wouldn’t change if that particular league filled or was actually a 10,000-man GPP that had overlay.
Then, I switched things up by altering the number of entrants as if each league filled to only 85 percent capacity, as well as 80 percent capacity. This would represent a decent amount of overlay (but nothing ridiculous since the rake is usually around 10 percent or so). Here are my actual NFL results.
The good news is that I have shown a better-than-average chance of reaching each level. If I were an average player, I should expect to finish in the 85th percentile or better 15 percent of the time, for example, but I actually check in at 20.5 percent.
You can see that the chances of cashing obviously increase with more overlay, and sometimes substantially so. Whereas my odds of finishing in the top 15 percent of lineups are normally 20.5 percent, they jump to 24.2 percent in leagues that fill to only 80 percent capacity. That might not seem like a huge deal, but it means that instead of 1-in-4.9 lineups cashing, my odds jump to 1-in-4.1, which is a pretty sizable improvement.
Thus, the benefits of overlay are two-fold; your expected value increases, but so does your probability of cashing, creating a more favorable range of outcomes for you in a given night. That allows you to actually play more than normal, further capitalizing on being +EV without taking on too much risk.
Further, I think the probability of cashing could be even higher than what I’ve demonstrated above just because overlay allows you to widen your player pool a bit. If there’s significant overlay, a lot more lineups become +EV, and if you can fire “non-optimal” player combinations and still have a positive expected value, that’s a great way to put down more cash while also reducing risk.
Taking Advantage of Overlay on DraftKings
DraftKings makes it extremely easy to leverage overlay into a profit because it’s so easy to enter lineups into new leagues. One of the ways that I personally do this is to create “overlay lineups.”
Whenever I believe there’s a possibility of overlay, I create additional lineups that I might or might not actually use. If there’s overlay, I have ammunition to fire, so to speak. As contests are about to close, I’ll enter the additional lineups into any tournaments with overlay. That way, I don’t need to re-enter the same lineup into a GPP and I’m also minimizing risk just a bit by diversifying the way I have exposure to certain players and player combinations.
There are probably other ways to take advantage of overlay, but I think it’s crucial to always put yourself in the best possible position to exploit it.