Investing in poker volatility management

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What does the word volatility mean to you?

You might think of a person who is volatile, meaning they might be a bit hot tempered or prone to make rash decisions. Maybe you’d think of a chemical that is volatile, meaning it might explode at any moment.

Basically, volatile doesn’t tend to conjure up something positive. When it comes to gambling, volatility means something a bit different, although there are some similarities. In gambling, volatility means about the same as it does with stock investing. You’d better expect some big ups and downs.

This isn’t necessarily a negative, but you do have to be prepared for it.

When investing, it probably means it is not a good idea to put the money you might need tomorrow into Internet startup companies. In gambling, it means you’d better bring a larger bankroll. It doesn’t mean you’re going to lose more, but it does mean you might lose more – at least more quickly. But, you’ll have a greater chance of recovering your losses with one strong hand.

Mathematically speaking, there is a formula for volatility that is applicable to casino gambling. But, I don’t think giving you a number will do much to help you as it’s all relative to other games.

Instead, I prefer to compare casino games to rides at an amusement park. Blackjack is like the lazy river. Jacks or Better video poker is like a waterslide. Double Double Bonus Poker is like the roaring rapid ride. You can use roller coasters if you prefer.

This week, I got a first round seat to volatility and how it can work. I was playing a five-play Multi-Strike Double Double Bonus Poker game. I’m not sure if it would be possible to play anything more volatile in the realm of video poker.

Multi-Strike has four levels of play. For each deal, you have to pay for each of the four levels. But you only get to actually play the next level if you get a winning hand on the prior level. So, if you’re a bit cold on Level 1, you never play Level 2, 3 or 4. These levels also pay in multiples (2x, 4x, 8x). So, playing the higher levels is an absolute must if you have any hope of winning.

Double Double Bonus Poker is already a very volatile video poker game. With a payout of only 1 for Two Pairs, your number of actual winning hands is pretty small. You are relying on hitting Four of a Kinds if you want to have a winning night.

You’re also hoping at least your fair share of them will be the bonus ones (A’s-4’s), and better yet with the kicker. This is where Double Double ratchets up the volatility relative to Jacks or Better. Basically, the more rare hands account for a larger percent of the payback.

I had been playing for about an hour, having hit only a one Four of a Kind (on the 2nd level) across all levels. I had started the day with $45 in my wallet as I really went over to the casino to put in my football picks for the weekend.

This really isn’t enough bankroll to play five-hand multi-strike at the penny level, but I felt like playing for a bit. I varied my wager from 1 to 3 cents (given you’re paying for 20 hands at a time, this really translates to 20 cents-60 cents per deal).

After that hour of play, I was down about $30 and things were not looking good. I was being dealt a fair number of Three of a Kinds, but could not turn a single one into Quads. I even had a few good shots on the 3rd level, but no luck.

Then lightning struck. I was dealt four Jacks on the third level with all 5 hands playing, with 3 cents going per hand. I won 3 x 50 x 5 x 8 (3 cents x 50 payout x 5 hands x 8 multiplier).

With that one hand, my whole session turned around. I won $60 on that hand while playing pennies. If I had only had $20 on me that day (or even $30), my bankroll would’ve been gone and I’d have been on my way home at the time I hit those Quads.

While playing, I kept wondering how the session might have looked if choosing to play Bonus Poker instead of Double Double. All those Two Pairs would’ve paid 2 instead of 1. The Four of a Kinds would have paid less, but I had only hit 1 up until hitting the big hand.

Of course, some of my strategy decisions would’ve been different, too, so it’s hard to make a fair comparison. But, on this particular day, I chose to play a game with very high volatility and got the thrill ride. I was down $30 playing pennies and made it all back and then some in one hand.

Had I been down $30 on a Bonus Poker machine (which would’ve been hard to do playing the same hour), my chances of coming all the way back would’ve been greatly reduced because I would have less chances to win it all back in a single hand.

Buy his book now!

Elliot Frome is a second generation gaming analyst and author. His math credits include Ultimate Texas Hold’em, Mississippi Stud, House Money and many other games. His website is www.gambatria.com. Contact Elliot at [email protected].

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About the Author

Elliot Frome

Elliot Frome’s roots run deep into gaming theory and analysis. His father, Lenny, was a pioneer in developing video poker strategy in the 1980s and is credited with raising its popularity to dizzying heights. Elliot is a second generation gaming author and analyst with nearly 20 years of programming experience.

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