The Value of Overlay in Daily Fantasy

Most RotoGrinders members already well-understand the value of overlay tournaments, but I wanted to write a quick article to which I could direct new players who are less familiar with the concept.

dk kickoff 1

“Overlay” is the term we use in the daily fantasy industry when a site guarantees more money in prizes than the amount covered by buy-ins. By watching the fill-rate of an upcoming tournament and predicting how many people might enter, an average player can often gain positive expected value just by entering the tournament. There’s no experience required, no seasoned skill-set of picking breakout players needed; an average player can expect to make money just by entering.

For the opening weekend of football 2013, DraftKings offered a million dollar guaranteed NFL kickoff tournament with a $200 buy-in and a top prize of $150,000. With an hour left before Sunday kickoffs, it was clear that this tournament was not going to fill in a big way. Only 2800 entries had been submitted, leaving $440,000 of one million dollars in prizes unaccounted for. Overlays of this magnitude are few and far between, but the same concepts I am about to demonstrate can be applied to any tournament that ends up having less money accounted for in buy-ins than guaranteed prizes awarded.

There’s always a rush of entries the hour leading up to a tournament that looks like it won’t fill because value-seekers in the industry (and now YOU!) are scrambling to enter teams to take advantage of the expected value, but when there’s only an hour left to enter teams, there’s only so-many more entries value-seekers can add. The DraftKings Kickoff Million ended with 3661 entries for a final overlay of $267,800.

The Value of Overlay: DraftKings Kickoff Million Example

Assuming that any team you enter has equal chance as any other team in the tournament (i.e. assuming you are an average player), below is a chart that lists your expected value for every entry at each payout position in this particular overlay tournament:

Position Chance * Prize EV
1st ($150,000) 1/3661 * $150,000 $40.97
2nd ($75,000) 1/3661 * $75,000 $20.49
3rd ($40,000) 1/3661 * $40,000 $10.93
4th ($25,000) 1/3661 * $25,000 $6.83
5th ($15,000) 1/3661 * $15,000 $4.10
6th ($12,500) 1/3661 * $12,500 $3.41
7th ($10,000) 1/3661 * $10,000 $2.73
8th ($7,500) 1/3661 * $7,500 $2.05
9th ($6,250) 1/3661 * $6,250 $1.71
10th ($5,000) 1/3661 * $5,000 $1.37
11th-15th ($3,500) 5/3661 * $3,500 $4.78
16th-20th ($2,500) 5/3661 * $2,500 $3.41
21st-30th ($2,000) 5/3661 * $2,000 $2.73
31st-40th ($1,500) 10/3661 * $1,500 $4.10
41st-50th ($1,250) 10/3661 * $1,250 $3.41
51st-100th ($1,000) 50/3661 * $1,000 $13.66
101st-200th ($500) 100/3661 * $500 $13.66
201st-300th ($475) 100/3661 * $475 $12.97
301st-400th ($450) 100/3661 * $450 $12.29
401st-500th ($425) 100/3661 * $425 $11.61
501st-600th ($400) 100/3661 * $400 $10.93
601st-800th ($375) 200/3661 * $375 $20.49
801st-1000th ($350) 200/3661 * $350 $19.12
1001st-1250th ($325) 250/3661 * $325 $22.19
1251st-1500th ($300) 250/3661 * $300 $20.49


Adding up these expected values for each payout position yields a sum total of $270.43, meaning that for every $200 you spend in this tournament, you can expect to win back $270.43! Let me rephrase that and state it again because deals like this don’t happen every day. For every entry you entered into this contest, you expected to earn $70!

It’s a bit like a lottery where the state is giving away $150,000 and paying you $70 for every ticket you take. You still have to pay to enter, of course, and your money is still at risk, but the more “average” lineups you enter, the more likely your expected return will converge on that $70 value. For this reason, rather than risk a single entry that has a high percent chance of not cashing by itself, value-seekers will enter many diversified lineups to minimize their risk and maximize their chances at the top prize. Marry this inherent positive expected value of overlays with a player who has a strong and experienced skill set for predicting player stat lines (so that your entries in the contest are no longer “average” but instead “better-than-average”), and you have a great combination for making near-guaranteed money and the best chance most of us will ever have of winning $150K+.

The next time you see an overlay brewing, consider the expected value you may be giving up by not entering.

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Comments

  • Cameron

    RG Co-Founder

    • 972

      RG Overall Ranking

    • 2014 FanDuel NFL Survivor Champion

    • 2016 RG Season Long Champion: NFL

    I think it’s interesting to sort by the “EV” column. I never thought about this before, but I think the amount of overlay should effect your strategy in building lineups. – 1500 Spots Paid. 3661 Entrants. The 2nd highest EV spot is: “1001st-1250th ($325)”

    Does this therefore imply that building some H2H-esque lineups with less upside, could prove almost as valuable as going with High-Risk, High-Reward lineups targeted solely at 1st place?

  • fishkillers

    That is nice –
    but the risk of a $200 entry isn’t at all offset by the (completely illusory) gains of overlay (for the average budgeted grinder.)
    The overlay in my opinion is only beneficial and “real” to the multiple entry user (deep pockets)

    Oddly, the greater the overlay on a large money event means (for me) that I avoid the low money events on that site as well.
    I can’t explain why that is, or if it’s common – but it has that effect on my investment.

  • futoo

    Wouldn’t draftkings just enter house entries to cover the rest? Is there any way to know if they do?

  • RiccisDeli17

    So if there’s a 87% overlay what does that mean?

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