The Effect of Overlay on Bankroll Management

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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.

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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.

About the Author

  • Jon Bales (JonBales)

  • Jonathan Bales is the founder of RotoAcademy and author of the Fantasy Sports for Smart People book series.

  • Priptonite

    • Blogger of the Month

    “and DraftKings pushes the envelope when it comes to infusing tournaments with free money.”

    Is that really a fair statement? My guess is that the DK team doesn’t all high-five each other when they eat thousands of dollars in overlay.

  • budfox6

    Pushing the envelope is not always done intentionally.

  • rosco78

    Yeah, I would think that all sites strive to eliminate overlay by structuring their tournament capacities accordingly after gauging popularity and demand. Market exploitation is still the most important factor in entering any lineup in any tournament…..I know that’s rather simplified reasoning but I like reducing things down to it’s simplified form…..you either have an advantage in a given contest (ie. knowledge of players, manipulation of salary cap, advanced match-ups) or you don’t….thanks for the article though

  • williwompa

    Is most of this overlay at smaller sites? I watch DK and FD right up to start and rarely see much besides the Millionaire maker on Sundays.

  • mrballer

    DK almost always has overlay in some sort of way.

  • fishcakeking

    FCK

    What outside of the millymaker would you find on draftkings with 15-30% overlay? I’d love to see a graph of the time of people entering draftkings contests to show how overlay often appears to be happening then evaporates.

  • Joe1Coal

    So, what you typed is a big article on common sense?

  • beezchild

    I think this article does a great job of conveying to a new player how overlay is an important factor in DFS success. I think people take for granted that everyone on Rotogrinders is a hardcore DFS player and understands every aspect of the game. In reality, when you first start playing daily fantasy seeing articles like this might be eye opening.

  • Thor_0622

    Ive seen $5 & $12 guaranteed leagues for NBA sometimes have nice overlays. Havent checked out PGA for awhile but believe they had some recently too

  • Mrm2010

    I’m one of the newbees and have been enjoying my first crack at dff. I’ve come to the conclusion that along with hours of study and research it takes some luck as well. Sometimes you make gut calls while other times you go with just the facts. So is the way you tell if there is oberlay in a tourny is if the payout is guaranteed but the max players has not been reached? I know to most of you that sems like an obvious answer but what I have learned is that some things that seem obvious are not. Also, If I may ask the group another question about decifering FD defensive stats. I see defensive stats where the D gives up more TDs, PaYs and RuYs but scores more FPs than when they give up less in these catagories. This to me makes zero sense. Would really appreciate any help one understanding this as well. These types of articles as well as the forums/blogs really help us new guys trying to have a little fun and maybe make a little cash along the way a lot so keep them coming no matter how simple they may seem to the old pros.

  • bostonboca

    I like the chart and how it demonstrates over time those few percentage points higher (% of cashing) makes quite the difference in your wallet at the end. Now finding sites/tourney’s with consistent overlay (where sites are consistently losing money) may be harder.

    I look for new sites with pricing irregularities , perhaps less talented players. For instance, I played one NEW SITE the last 6 weeks of season. (under name “Bostonboca” I entered 126 contests and finished in pay out zone 79 times. Also over 80% of those entries were NOT 50/50’s or H2H’s. (more like top 15-25% cashed ) and tourney’s 10-100 contestants.

  • dwoods5

    Great piece. However, aren’t you concerned your strategy of entering sub-optimal lineups reduces your ROI? When you reduce risk, you also reduce return. Portfolio theory, no?

  • summerofgeorge

    Dumb question but in a 50/50, if the league doesn’t fill, do they pay 50% of how ever many entrants? or do they pay out 50% of whatever the size of the league was supposed to be? i.e. if only 14 seats fill in a 20 person 50/50, do they pay top 10 or top 7?
    Thanks, you guys are a great resource!

  • Priptonite

    • Blogger of the Month

    @summerofgeorge said...

    Dumb question but in a 50/50, if the league doesn’t fill, do they pay 50% of how ever many entrants? or do they pay out 50% of whatever the size of the league was supposed to be? i.e. if only 14 seats fill in a 20 person 50/50, do they pay top 10 or top 7?
    Thanks, you guys are a great resource!

    The payout structure doesn’t change. In your example of a 20-man that only gets 14 entrats, the top 10 will still be paid, not the top 7. This assumes the prize pool is guaranteed, of course.

  • Rm5Sumpreme

    Overlay get concepts approach to construct lineups

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