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The house edge

Different expectations

The words ‘house edge’ are well known by most casino patrons, and even by most laymen with even a passing interest in placing a bet. The house edge is a measure of the casino’s advantage in any given game. Some games have a consistent house edge, and some have a variable house edge. Roulette is an example of a casino game with a house edge that is static at 5.26%. Blackjack is an example of a game with a variable house edge, and if you play well it can drop to under half of one percent.

But what do the percentages mean? Think about it like this: that percentage represents the amount of money the casino will retain, out of all the money that gets bet at the game, over the long run. This means that a roulette table which has players betting an average of $12,000 an hour will retain $7,574 each day. I have no idea how much a roulette wheel has pass through it in an hour, but regardless, the casinos retain about 5% of it. This is just a general rule though, which can only be applied to ‘the long run’. This means that on any given day that you calculate what the casino actually takes in (called the house hold), it will not come out to exactly 5.26%, but if you were to take data from a large set of days, things would begin to even out to near 5.26%, and theoretically if you keep expanding your set of observed data, the house hold will eventually come very close to the predetermined house edge.

I started this section with the title ‘different expectations’ in order to present to you the multitude of ways the casino likes to express the concept of house edge. The word ‘expectation’ is the mathematical term for the house edge. Expectation is a calculated number for a bet, which takes into account the potential amount of winnings, the potential amount of loss, and the odds of winning. What you end up with is a percentage that either describes what the player can expect to win, or expect to lose. Of course when it comes to casino games the expectation always ends up being what the player would expect to lose, and so the number is most commonly referred to as the house expectation, or the house edge, and is expressed as a positive number. Quote unquote negative expectation games are only negative for the player.

Perhaps in an effort to confuse the masses, casinos often evaluate house edge in three or four different styles, each of which corresponds to a term you might find more familiar. There is of course the house edge, and also the return percentage, the vigorish (or vig), and the hold. While they all essentially refer to the same thing, understanding the perspective each phrase is spoken from is helpful.

In blackjack the casino advantage is usually referred to as the house edge, unless you’re talking about the real amount of cash the casino has raked in over a given amount of time, in which case you’re referring to the house hold. The return percentage is basically the compliment of the house edge. Return percentage is most often used to describe slot style games. A house edge of 5% is equal to a return percentage of 95%. Add ‘em together and you’ll always get 100%. Vigorish, or vig, is a term most often used to describe a flat fee charge by the casino. In a game like baccarat for instance, each time the player wins a certain way, they must pay 5% of their winnings to the house. In a game where you play at true odds, the casino often charges a Vig so that the get a consistent profit.



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