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Difference Between House "Edge" and House "Hold"

1 September 2006

This week, we're going to look at the difference between the house "edge" and "hold." For six years, I've been recommending you play certain games and avoid others based on the theoretical house edge. But sometimes confusion arises because you may read a report that says a casino's win rate on blackjack is 20 percent, and yet I've told you the house edge is only 0.5 percent. The confusion is caused by the fact that house edge is a completely different concept from the house's win or hold.

Let's start with the house edge or house advantage; it's the casino's theoretical profit divided by the player's theoretical total bets. There is a method to determine each game's profit and each game's total bets, depending on the way the game is played and the complexity of the game's bets. For example, the calculations for craps are based on how many ways the dice can be thrown and the various payoffs for the myriad of bets.

In past columns, I've worked through examples of some of the simpler methods, so I won't go into detail here, but the result is expressed as a percentage of each one-time wager that you make. For example, in a craps game, the house edge is said to be 1.41 percent against a single pass line bet. That doesn't mean that each time you bet $10 on the pass line, the casino will automatically keep 14 cents and will hand back to you $9.86. The key word here is "average." In the long run, the casino will keep an average of 14 cents for every $10 you bet.

Okay, so now let's look at "hold," which is the actual percentage of what the casino wins out of the actual amount of your total buy-in or "drop." Let's say you sit down at a blackjack table and buy in for $100. The dealer will "drop" your Ben Franklin into the drop box and will return a stack of 20 red $5 chips to you.

Now, the theoretical house edge on each $5 wager you make is 0.5 percent, so if you go through that entire stack of 20 chips once, theoretically you'll have $99.50 left, and the casino will have won 50 cents from you.

But that's from just one pass-through of that stack of 20 chips or, in other words, 20 wagers. If you stay at the table and wager through the $99.50 remaining in front of you, then the casino will keep 49.75 cents and you will have $99.0025 left. Forgive me for going to extremes here, but I want to make a point: if you stay at the table long enough and if you make enough bets, the house edge on each individual $5 wager will eventually whittle your original $100 buy-in down to $0. That means the hold will be 100 percent.

Of course, we all know it doesn't work exactly this way. Winning and losing streaks happen; you'll have ups and downs, and you'll get either tired or disgusted and leave after losing only $20-$50. Then the hold is only 20-50 percent. Or you may get lucky and smart and decide to leave after winning $50-$100. Then the casino's hold is in the negative realm.

And, yes, there are practical applications for this newfound knowledge. For you the player, comparing theoretical house edges should be what helps you determine which game to play. For the casino, however, it's the hold that's, as Henry Tamburin likes to phrase it, "the sacred cow" that determines if the light bill is paid and if pit bosses get to keep their jobs.

So far, we've talked about the casino's hold in relation to one player. If that player buys in for $100, loses $20 over the course of an hour's play and walks away with $80 worth of chips, then the hold on that player's play equates to 20 percent. But, of course, there are several players at the table at any one time, and casino personnel certainly don't compute the hold, or win rate, after each player's departure. Instead, they do it at the beginning and end of each shift by looking at the amount of money in the chip trays and the amount of money in the drop box and comparing those two totals.

Long before I discovered video poker, I played blackjack for an hour in the mornings, five days a week, at the Copa's $2 table. At the time, every $50 worth of buy-in earned a free ticket to a monthly drawing, so naturally I bought in every day for $500, put $400 aside and played with only $100. My goal was to win eight "units," or $16. If I won it within 15 minutes, I simply stopped playing, sipped on my coffee or Virgin Mary, talked to the dealer and then went on to work. Of course, sometimes I lost money, never very much, but by the time my hour was up, I almost always took at least $400 in chips away from the table and cashed them at the cage.

I had not a clue that my limited $2 betting was skewering the graveyard shift's hold percentage. The pit bosses never complained and were just as friendly to me as if I had been a big loser.

Next week, we'll compare the holds on table games and machine games, and later we'll look at a comparison of various casino bets and their house edges. Until then, aces and faces to you.

Linda Mabry

Low Roller Linda Mabry lives and gambles on the Mississippi Gulf Coast. She writes a weekly, general gambling advice column for the Biloxi Sun Herald, and may be contacted through her e-mail address, lnmabry@cableone.net or her web site www.thelowroller.com
Linda Mabry
Low Roller Linda Mabry lives and gambles on the Mississippi Gulf Coast. She writes a weekly, general gambling advice column for the Biloxi Sun Herald, and may be contacted through her e-mail address, lnmabry@cableone.net or her web site www.thelowroller.com