Within the DFS, poker and fantasy gaming industries you’ll most likely come across the term ‘overlay’ from time to time.
“Overlay” is the term we use in tournament based industries when a company guarantees more money in prizes than the amount covered by buy-ins.
An overlay presents itself when there is a guaranteed prize associated with a tournament that will not be filled.
What does it mean and how can I spot an overlay?
For example, Moneyball need 1100 entries at $10 per buy-in to create an $11,000 tournament pool (that’s assuming they’ll keep the 10% or $1,000 as their tournament rake).
You fill out your roster and go to enter right before lockout and notice that there is only 620 entries. You quickly enter your team right on lock and the competition closes.
There is only 621 buy-ins, or $6,210 in entry fees. Thus creating an overlay of $3790 or 37.9% of the prize after rake.
It’s always good to keep an eye on new DFS sites as they pop-up because they are normally, overlay goldmines.
The new company is looking to get off the ground, build their clientbase and get people excited about their contests they’ll often set prizes above and beyond what they expect to fill.
It’s a marketing cost for them, but a bank building opportunity for us!
If an overlay is present, should I put more entries in?
Well the quick answer is yes, as a general rule you should. However, there are some mathematical considerations you must make. As well as playing to your strengths.
Always consider taking the rake from your calculations, especially if it’s a sport you are not strong at. Just like in Sports or racing betting when you make a 100% market to find where the ‘true’ value lies.
For example, if its 1100 entry GPP and $10 buy-in. Let’s assume the DFS site is taking a 10% rake. So $11,000 prize pool is reduced down to $10,000 after they take their rake.
So, if you’ve spotted an overlay of less than 10% (or whatever the given rake is), tread carefully.
Once we’ve taken out the rake…. How to calculate the size of the overlay
$10,000 (prizepool) / 100 entrants = $100 ‘equity’ for every entrant.
In other words, the $100 entry fee buys everyone $100 in prizepool equity, making it a breakeven proposition.
If the prizepool was somehow split equally between every entrant, then everyone would get their $100 back – no more, no less.
That’s our true market. But there isn’t the full number of entrants this time and there may be an overlay! Let’s check it out.
$10,000 (prize pool) / 70 entrants = $142.86 equity for every entrant.
Given a true, even mathematically contest you are getting $142.86 back for an investment of only $100 ($42.86 overlay on each entry).
We will again stress, this is strict maths and things like variance and the skill of the players playing will impact the above.
Good luck in your DFS contests and spotting/capitalising on those overlays!
