Print Friendly, PDF & Email

Payback, Return, Variance, and Volatility

What these terms mean to your video poker play

By Jerry “Stickman” Stich

 

You might ask what difference volatility makes to the video poker player.  Plenty!  The higher the volatility, the higher – and lower – the bankroll swings.

     Two factors that determine a player’s chances of winning or losing on a particular video poker game are the payback (sometimes called return) and variance (also called volatility) of the game.

     Payback, or return, is the amount of money that is “paid back” or “returned” in the form of “winning” hands to players from all the money played through a video poker game.  It is expressed in percentage terms.  What this means is that by playing a game that has a 99.54 percent return, you can expect that in the long run you will get back $99.54 for every $100 of money played or coin-in for that game.  If you are a dollar player that plays five dollars per hand, for every 20 hands played ($100 in coin-in), you will have an average return of $99.54 (payback) for each of those twenty hands over the long run.

video poker

     Another way to talk about this concept is by referring to the house edge.  The house edge is what the casino keeps from your video poker play – or any casino game for that matter.  The house edge is the difference between the money bet or coin-in and what the game returns to the players.  Using a 99.54 percent return like in the example above, the house edge is $100 minus $99.54.  This equals 46 cents, or a house edge of .46 percent.

     It is important to note how low that house edge is in comparison to other games on the casino floor.  When you see signs advertising “Our slots pay back 97.3 percent!” remember that the house edge you are playing against is 2.7 percent!  A house edge of .46 percent or a payback of 99.54 percent is the actual house edge and return percentage for the full pay version of Jacks or Better video poker with perfect play (commonly known as 9/6 JOB).  I would venture to say there is not a standard slot machine in any major gaming market that has a house edge as low.  That is one reason video poker is so popular.

     Of course, not all video poker game returns are as high as 99.54 percent.  Some go as low as 95 percent; and in some extremely bad situations, even lower.  However, on the positive side, some returns are higher – even more than 100 percent!  The player has to know how to find, recognize, and learn to play the good games, while avoiding the bad games.  Fortunately, this information is readily available in magazines such as this one, as well as in books and on the Internet.

     Remember earlier that I used the phrase “in the long run.”  After 20 hands on a dollar game playing five dollars per hand, I guarantee you will NOT have $99.54.  You will have $100, or $105, or $85, or any multiple of five dollars, since that is what the hands pay.  You will have ups and downs during your playing session.  Your credit balance will swing up and it will swing down.  However, after thousands upon thousands of hands played, the average return paid will be very close to $99.54 for every $100 in coin-in you ran through this game.

     The swings in bankroll that you experience are due to volatility or variance.  Volatility is a generic term which refers to how high or low the bankroll swings.  Variance is a mathematical term that puts a number on the volatility. It measures how far a set of values is spread out.  The variance of video poker games runs from a low of about 12-15 to a high of nearly 200.

     You might ask what difference volatility makes to the video poker player.  Plenty!  The higher the volatility, the higher – and lower – the bankroll swings.  If you are fortunate enough to hit a large paying hand early in your session or video poker playing career, you will have plenty of money to continue playing.  What if you don’t hit any large paying hands early on?  In a high volatility game, the player loses at a much faster rate than they would on a low volatility game.  The bankroll requirements for a high volatility game are much higher than for a low volatility game.  Therefore, you must have enough cash, or bankroll, to ride through the losing streaks.

     A future article will discuss bankroll requirements in more detail.  For now, just be aware that multiple, high-paying hands on a game’s payback schedule come with a price. That price is steeper losing streaks and a correspondingly higher bankroll requirement.

     I suggest the following guidelines for deciding whether to play a video poker game based on its variance.  From a bankroll safety point of view, if the variance is under 40, it is a fairly safe – albeit possibly boring – game to play.  A variance of 40-80 means it may be an exciting ride, but think carefully about whether you have the bankroll and emotional will to play this game as there will be significant losing streaks.  If the variance is over 80, seriously consider a different game.  Unless you are certain you have a large enough bankroll and can emotionally endure potentially huge losing streaks, these games may not be for you.

     You can use my advice above, or choose to ignore it.  After all, it is just my opinion and it is your money you’re risking, not mine.

 

How Would You Play This Hand?

In the article above, I discussed variance and its effects on a player’s bankroll.  Let’s take a look at a hand from a high variance game – Triple Double Bonus. The pay table is:

Hand

5-Credits Pays

Royal Flush

4000

Straight Flush

250

4 Aces w/2, 3, 4

4000

4 2s, 3s, 4, w/A, 2, 3, 4

2000

4 Aces

800

4 2s, 3s, 4s

400

4 5s thru Ks

250

Full House

45

Flush

35

Straight

20

3 of a Kind

10

2 Pair

10

Jacks or Better

5

 

The return on this game is 99.57 and the variance is 98.

With five credits played you are dealt the following hand:

Ah Js 5s 3d Ts

How would you play it?

Let’s examine the options.  You have three of a flush (Js 5s Ts), two of a royal flush (Js Ts), a lone Ah, and possibly the Ah with the 3d kicker. You could also save the two high cards or just the Js.

What would you do?

If you choose to hold the Ah, you are absolutely correct!  The Expected Value (EV) for this play is 2.346.

The EV for each of the other possible holds is as follows:

Three of the flush (Js 5s Ts) – EV 2.262

Two of a royal flush (Js Ts) – EV 2.186

Ah Js – EV 2.115

Lone Js – EV 1.964

Ah 3d – EV 1.750

Even though the kicker is an important card in Triple Double Bonus, it’s useless without the quads to go with it—and it can’t overcome the steady returns of a flush draw in the long run.

Payback, Return, Variance, and Volatility in Video Poker.

Do you have a comment or question about this article?


Look for your question to be answered in either Casino Player or Strictly Slots Magazines.