Blackjack Variance

• Poker Variance Definition
• Blackjack Variance Chart

• The standard deviation of a blackjack round per dollar bet on a single hand is $1.13. The excess $0.13 accounts for 3-to-2 payoffs on naturals and coups involving splits and doubles. For one round, per dollar uniformly spread across several hands, the standard deviation.
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• Briefly, variance in blackjack can be defined as the deviation from the expected payments in the game. The expected payment means the amount you expect to win for your bets. Normally, it is expressed as a percentage. This concept is closely related to the mathematical advantage in blackjack.

ENCYCLOPEDIA OF BLACKJACK

V. Acronym for variablepenetration.

Vagabond. A professional blackjack player. Interviewed on the

Short for variance. In statistics, the mean of the squares of the variations from the mean of a frequency distribution. In other words, the variance is the square of the standard deviation. We use the term variance to refer to the fluctuation or luck in the game. Wiki: Variance possiblywrong.wordpress.com variants. The blood is the life! Vampires is a medium variance slot machine with a highly respectable return to player figure of 96%. Players of this spooky slot from Amatic can expect to win up to 1,000x their bet and participate in exciting free spin bonus rounds.

van-john. The game of twenty-one as once known in England. A corruption of the French term vingt-et-un. See blackjack.
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Vancura, Olaf. Co-author of the excellent book Knock-Out Blackjack and the unbalanced KO Count.
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VAPC. See Victor Advanced Point Count.

var. Short for variance.

variance. In statistics, the mean of the squares of the variations from the mean of a frequency distribution. In other words, the variance is the square of the standard deviation. We use the term variance to refer to the fluctuation or luck in the game.
[ Wiki: Variance ]
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variants. See blackjack variants.

variations. 1) See rule variations. 2) See play variations.

Vegas, Radek. (Born 1983) A German journalist and gambling expert. He discovered blackjack as his passion when he first visited Las Vegas in 2010. In 2014, he published the German blackjack book Blackjack Winner. He has also written several articles for Victor Advanced Point Count (VAPC) Point Count System / Level 3 (Example DMPro)

A card counting system in which a card is assigned a value, either positive, negative, or zero, as it is played.

Poker Variance Definition

A 2 3 4 5 6 7 8 9 10
0 2 2 2 3 2 2 0 -1 -3

Betting Correlation

[ 32 Victor Insurance Parameter. (VIP) (Rich Victor) Used in balanced counts that disregard the Ace. The VIP is defined as the running count divided by the number of unseen aces. According to Victor, 'it provides a much simpler and more accurate assessment of the insurance situation than the customary match-up of true count and insurance index.'
[ March 2002 Victor, Rich. See Victor Insurance Parameter above and the Victor Advanced Point Count.

Video Blackjack. A reference to an electronic video blackjack machine. Many of these machines paid only even money for a blackjack or at best 6 to 5. Beginning in 2014, most video blackjack games in Las Vegas began paying only 6 to 5.

WARNING:If you see 'Blackjacks pay 2 for 1', it means they are paying you even money. (2 for 1 is NOT the same thing as 2 to 1)
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From a Game King / IGT Blackjack Machine
Notice 'Blackjack pays 2 for 1'

The newer video blackjack machines may be fancier but they
are also just as bad! Notice 'Blackjack pays 6 to 5'

vig. As in vigorish. The casino commission in a game.

vingt-et-un. The French term for the game of twenty-one. It is believed that vingt-et-un was introduced in France and the rest of Europe in the 1700s. See also trente-un, van-john, pontoon, and blackjack.
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vingt-un. An earlier French wording for vingt-et-un.
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VIP. See Victor Insurance Parameter.

Vogel, John. Former member of the Czech Team. See George Hascik.

Voodoo. A reference to the

VP. Acronym for video poker – a game that is also potentially beatable.

Introduction

The Kelly Criterion is a bet-sizing technique which balances both risk and reward for the advantage gambler. The same principle would work for any investment with an expectation of being profitable. For the gambler/investor with average luck bankroll and a fixed bet size, the expected bankroll growth after one bet is:

For example, suppose a casino ran a promotion in craps where the 2 paid 3 to 1 and the 12 paid 4 to 1. A 3, 4, 9, 10, or 11 still pay 1 to 1 and every other total loses. The probability of a 2 or 12 is 1/36 each, of any even money win is 14/36 and of a loss is 20/36. Suppose also the player bets 1% of his bankroll every bet. Then the expected bankroll growth per bet would be:

(1 + (0.01*3))^(1/36) * (1 + (0.01*1)^(14/36) * (1 + (0.01*-1))^(20/36) * (1 + (0.01*4))^(1/36)) - 1 = 0.00019661.

This product is maximized by Kelly betting. Kelly betting also minimizes the expected number of bets required to double the bankroll, when bet sizing is always in proportion to the current bankroll.

The Kelly bet amount is the optimal amount for maximizing the expected bankroll growth, for the gambler with average luck. While betting more than Kelly will produce greater expected gains on a per-bet basis, the greater volatility causes long-term bankroll growth to decline compared to exact Kelly bet sizing. Betting double Kelly results in zero expected growth. Anything greater than double Kelly results in expected bankroll decline. What is more commonly seen is betting less than the full Kelly amount. While this does lower expected growth, it also reduces bankroll volatility. Betting half the Kelly amount, for example, reduces bankroll volatility by 50%, but growth by only 25%.

For simple bets that have only two outcomes, the optimal Kelly bet is the advantage divided by what the bet pays on a 'to one' basis. For bets with more than one possible outcome, the optimal Kelly wager is that which maximizes the log of the bankroll after the wager. However, for bets with more than one outcome, that can be hard to determine. Most gamblers use advantage/variance as an approximation, which is a very good estimator. For example, if a bet had a 2% advantage, and a variance of 4, the gambler using 'full Kelly' would bet 0.02/4 = 0.5% of his bankroll on that event. Remember that variance is the square of standard deviation, which is listed for many games in my Game Comparison Guide.

Let's look at three examples.

Example 1: A card counter perceives a 1% advantage at the given count. From my Game Comparison Guide, we see the standard deviation of blackjack is 1.15 (which can vary according to the both the rules and the count). If the standard deviation is 1.15, then the variance is 1.15² = 1.3225. The portion of bankroll to bet is 0.01 / 1.3225 = 0.76%.

Example 2: A casino in town is offering a 5X points promotion in video poker. Normally the slot club pays 2/9 of 1% in free play. So at 5X, the slot club pays 1.11%. The best game is 9/6 Jacks or Better at a return of 99.54%. After the slot club points, the return is 99.54% + 1.11% = 100.65%, or a 0.65% advantage. The Game Comparison Guide shows the standard deviation of 9/6 Jacks or Better is 4.42, so the variance is 19.5364. The portion of bankroll to bet is 0.0065 / 19.5364 = 0.033%. By the way, this exact promotion is going on at the Wynn as I write this, for September 2 and 3, 2007.

Example 3: A sports wager has a 20% chance of winning, and pays 9 to 2. The advantage is 0.2×4.5 + 0.8×-1 = 0.1. The optimal Kelly wager is 0.1/4.5 = 2.22%.

Following is the exact math of example 3. Let x be optimal Kelly bet, with a bankroll of 1 before the bet. The expected log of the bankroll after the bet is...

f(x) = 0.2 × log(1+4.5x) + 0.8 × log(1-x)

To maximize f(x), take the derivative and set equal to zero.

f'(x) = 0.2 × 4.5 / (1+4.5x) - 0.8 / (1-x) = 0

0.9 / (1+4.5x) = 0.8/(1-x)

0.9 - 0.9x = 0.8 + 3.6 x

4.5x = 0.1

x = .1/4.5 = 1/45 = 2.22%

The math gets much messier when there is more than one possible outcome, such as in video poker. The method is still the same, but getting the solution for x is harder. The easiest way to solve for x in such cases, in my opinion, is experimenting with different values, using the higher and lower techniques (like the Clock Game on the 'Price is Right'), until the f'(x) gets very close to zero.

I did this for two common video poker games with greater than 100% return. For 'Full Pay Deuces Wild,' with a return of 100.76%, the optimal bet size is 0.0345% of bankroll. For ' 10/7 Double Bonus,' with a return of 100.17%, the optimal bet size is 0.0062637% of bankroll. I have heard a rule of thumb that to make it in video poker you should have a bankroll of 3 to 5 times the royal amount you play for. If playing Full Pay Deuces wild, the exact amount is 3.66 royals. For 10/7 Double Bonus it is 19.96 royals.

Simulations

To prove my statement that Kelly minimizes the number of bets to double the bankroll I assumed an even money bet with a 51% chance of winning, for a 2% advantage, and 2% Kelly bet size. Here is how many bets were required on average to double the bankroll at various bet sizes. If a winning wager would put the bettor over double the bankroll, he would only bet what was needed to exactly double the bankroll.

Average Bets to Double Bankroll

Kelly Vs. Optimal Video Poker Strategy

In my Sep. 20, 2007 Ask the Wizard column I suggested the Kelly bettor should sometimes not play optimal video poker strategy. My reasons are explained there.

Links on Kelly

German translation of this page.

Fortune's Formula by William Poundstone. Read my review.

A good source on Kelly, especially as it pertains to blackjack, is Blackjack Attack by Don Schlesinger.

SBRForum.com has good material on Kelly, including the article 'A Quantitative Introduction to the Kelly Criterion', part I and part II, and a Kelly calculator.

The Kelly Criterion at Wikipedia.

Blackjack Variance Chart