Calculating the House Edge When Taking Odds

Jerry:

I have a point that concerns the fallacy of adjusting our vig calculation when taking odds.

Let's exaggerate an example. Say we have a $10 line bet and $5 million in odds. The odds bet has NO vig, ergo "no money at risk". Over time one will break even on all odds bets. Also over time we will lose approximately $0.14 on our $10 bet.

It's illogical (but all casinos want you to think this) to say we had $5,000,010 at risk, making our percentage loss real small.

Of course, the exception is dice control, obviously then you want to get more money in action, because now your odds bet has a healthy positive percentage.

Tony

Dear Tony,

You are absolutely correct in stating over time (the long run) we will lose approximately 14 cents for every $10 wagered on the pass line - in a random game. You are also correct in stating that over time the odds bets will break even.

The statement that I have trouble with is: "The odds bet has NO vig, ergo no 'money at risk'."

If you have played craps for any amount of time, you know that there are many peaks and valleys in your bankroll as the game progresses. You may be riding high after several wins in a row, your bankroll getting flush with newly won cash. What a great feeling it is!

However, the reverse also happens. You place bet after bet - and lose bet after bet. At times it seems you can do nothing right. No matter what you do, you lose.

This up and down roller-coaster ride is called variance or volatility. You will always have ups and downs in any casino game. These up and down cycles are inherent in any random game. The length and basic severity of the variance is determined by randomness. There is nothing you can do about that. The amount of money at risk, however, impacts the peaks and valleys.

Betting a small amount of money in any combination (on the pass line and as odds) reduces the dollar amount of the swing. Betting more money will turn those rises and dips into hills and valleys. Betting still more money and you will experience giant mountain peaks and gaping chasms. The peaks are great fun, but the chasms can wipe you out.

So even though you will only lose about 14 cents for every $10 you bet on the pass line - regardless of the odds you place, the odds are, indeed, money at risk as they affect the severity of the ups and downs of your bankroll. For this reason, it is proper for the edge to drop as you increase the odds.