Statistical Arbitrage strategy applied to Video Poker
Introduction
Jacks or Better is a popular video poker game available at many online casinos. When collecting casino matched deposit bonuses, it counts towards wagering requirements for most online casinos, has a high payout, and a large jackpot.
This article will show readers how to calculate and maximise their expected return when using Jacks or Better to clear Casino bonuses. In effect, this is a statistical arbitrage strategy similar to that used by Casinos to maintain a house edge against players.
Readers who do not already know how to play Jacks or Better are advised to read this tutorial [http://www.casino365.com/GameHelp.asp?doc=HELP_VIDEOPOKER1] covering the basics.
Simple Optimal Strategy
CSBS favours a simple Jacks or Better strategy as it allows a faster rate of play with minimal expected loss. 5 coins should be played per hand as this maximises the payout from a Royal Flush.
This simple strategy has a 99.46% payout. To use the it, find all the ways to play a possible hand from the list below, and select the one that is highest. A high card is one that is a Jack or better (i.e. Jack, Queen, King or Ace).
To execute the strategy, players simply play the initial hand that is highest in this list:
- Full house or better
- 4 to a royal flush
- Straight, three of a kind, or flush
- 4 to a straight flush
- Two pair
- High pair (i.e. pair of Jacks, Queens, Kings or Aces)
- 3 to a royal flush
- 4 to a flush
- Low pair (i.e. pair of Tens or lower)
- 4 to an outside straight
- 2 suited high cards
- 3 to a straight flush
- 2 unsuited high cards (if more than 2 pick then pick lowest 2)
- Suited 10/J, 10/Q, or 10/K
- One high card
- Discard everything
Expected Returns – Intercasino US Example
Before claiming any casino deposit bonuses, it is important to understand the terms and conditions, and any wagering requirements. As an example, we shall consider claiming the Intercasino US $90 monthly deposit bonus, and demonstrate how to calculate the expected return.
At time of writing, Intercasino US offer a $90 monthly deposit bonus. This means that playerss depositing $90 will receive a $90 bonus into their account. (Intercasino US credits this immediately upon deposit, but other casinos may act differently).
The terms and conditions state that players must wager an aggregate total of 25 times the bonus in the casino before they can withdraw the bonus money. For example, a player who deposits $90 and receives a $90 bonus must then wager an aggregate total of $2,250 before they can cash out.
A player using the Simple Strategy would expect a payout of 99.46% which is equivalent to a loss of 0.0054%. Therefore, if they wager the full $2,250 wager requirement they would expect a loss of $2,250 * 0.0054 = $12.15.
Since the player received a $90 deposit bonus, their expected profit is therefore – $90.00-$12.15 = $77.85.
Problems to consider
There are some additional considerations that players may want to consider before taking advantage of these bonuses. A few are listed here:
- Neteller users must pay $1.00 to withdraw. This is an additional cost reducing the expected return to $76.85.
- The expected return is only an estimate. Players are not guaranteed to win every month, though if they hit a Royal Flush then they could make a lot more than $77.85.
- Some casinos will allow players to withdraw their deposits before they have even started working through the wager requirements. CSBS does not recommend this as it can lead to players being banned for abusing the promotions.
