In an earlier post I talked about what Volatility is on a slot machine, and I’ve explored the concept for some time. Variance is a related concept, and tends in some ways to come out of the outcome of such volatility.
Variance is the deviation from the expected outcome, whether positive (above the norm) or negative (below the norm). This is usually talked about when thinking about a gaming session, versus a slot machine, or the slot floor as a whole. Let’s explore each example in turn.
For a Gaming Session
Let’s say you’re playing blackjack (but it could be a slot machine, etc.) where you know the long-term expected payback is 99 percent. If you’re wagering $10 a hand and playing 100 hands an hour, that 99 percent means you should lose one unit, or $10, per hour.
But if you’ve sat at a table, you’ve probably seen the dealer win a bunch of hands in a row. And there have probably been scenarios where you’ve won some number of hands in a row. That’s the volatility of the game.
So now let’s say you played those 100 hands. And instead of being down $10, you made $100. That’s great! That’s also known as positive variance – you ended up having an outcome that was above the expected norm, which is a loss of $10.
On the other hand, let’s say you lost $100; in that case you had negative variance because you lost more than expected.
Versus a Slot Machine
We normally don’t know what a slot machine pays back on its own, but many times there’s data out there for a denomination or a casino. We can also ascertain trends by looking at the casinos that do report, to get a general idea of what to expect from the casinos that don’t.
If you know penny slots pay back something like 85-90 percent on average, if you wager $100 through a machine, the average payback will be something like $85-$90. But you could hit a jackpot, or win basically nothing. Here too, you can see positive or negative variance for your casino play on that slot machine.
Versus a Slot Floor
I know of a number of regular slot players who will sometimes look at their coin-in and coin-out for a casino during the year, and compare it to the public data or their knowledge about slot machines, and determine if they’ve had positive or negative variance over what’s been expected.
I’ve looked at data and had some years where I had a 60% payback year at certain Las Vegas casinos. My coin-in wasn’t substantial, but could constitute thousands of spins, which just goes to show you “short-term variance” can get into the thousands or even tens of thousands of spins; the long term expected payback for slots usually run into the hundreds of thousands, or even millions, of spins.
When you can only do a few hundred spins an hour, or at most a thousand, it shows how many spins you’d need to do to approach the expected average.
This is also why some players can manage to have a winning year despite a number of visits – one really good hit or run at a casino can take awhile to be averaged back down to the norm. Of course, that means other players have below average results too.