The Wizard of Odds

Analyzes
the New
Casino
Games
B Y M ICHAEL S HACKLEFORD

The insurance business

has always been a gamble
but actuaries havent exactly
been considered high rollers
at the gaming table. Until now.

H AT A R E T H E O D D S ?

Its the question all casino gamblers ask

themselves when they sit down at the
gaming table, and its a question actuaries are uniquely qualified to answer. After all, the role of an actuary
is to measure risks according to probabilities of possible outcomes. Casino gambling provides the excitement of risk taking in a controlled environmenta perfect combination for an actuary.
This explains why, after five years with the Social Security Administration, I decided to give up my career
as a government actuary and devote all my time to the
analysis and testing of casino games.
34

Contingencies

November/december

2000

I use three main approaches to analyze casino games:

Simple math: Many games of luck can be analyzed
easily by anyone comfortable with high school mathematics. Games such as craps, roulette, and keno can be
evaluated easily using only a decent calculator.
Combinatorial: Games of skill require analyzing
every possible outcome after every possible decision.
In card games, this may involve testing billions of possibilities or more. Every possible outcome must be
weighted by its probability, then the sum taken over all
possibilities. The course with the greatest average return is the best play. By measuring over all initial situations the return of the game can be evaluated. With
games like blackjack, the varying card composition remaining in the deck(s) can necessitate trillions of calculations. This brute force method can take a personal
computer all night or longer to complete.
Random simulation: Some games are so difficult
to model that a random simulation is the only way to
go. With the speed of modern computers, this method
is quite reliable in games with low payoffs. For games
with rare yet large jackpots, however, this method
can be unreliable due to bias in random number generators. This problem continues to be one of my greatest challenges.
Contingencies

November/december

2000

35

Figure 1.

Figure 2.

Odds
HAND

PAY O F F

Royal flush

100 to 1

Straight flush

50 to 1

Four of a kind

20 to 1

Full house

7 to 1

Flush

5 to 1

Straight

4 to 1

Three of a kind

3 to 1

Two pair

2 to 1

Pair

1 to 1

Ace/King

1 to 1

Four of the most successful new casino games of the 1990s

are Caribbean Stud Poker, Let It Ride, Spanish 21, and ThreeCard Poker. (For an analysis of the latter two, see the Contingencies website at www.contingencies.org.) Developing a successful casino game is like introducing a new insurance product:
Its a long process, complete with a different regulatory agency
in each state. Theres always the possibility a new game can be
lost in litigation over the allegation that it stole someone elses
concept. And ironically, casinos are risk averse when it comes
to trying anything new.
The odds of a new game ever making the first dollar in profit for its owner are slim. These four games beat the odds and
can now be found in casinos across the United States and abroad.
Caribbean Stud Poker

This game got its name from its origins on Caribbean cruise
ships. Eventually Mikohn Gaming purchased the game and put
it in casinos throughout the United States. Caribbean Stud can
also be found at many online casinos under different names,
such as Caribbean Poker or Cyber Stud Poker. The game is
played on a blackjack-size table. The rules are based on fivecard stud and are easy to learn.
The Rules

In Caribbean Stud Poker, each player plays against the dealer,

not each other. After making their ante wagers each player and
the dealer are dealt five cards. The players cards are dealt face
down. Players may look at their own cards, but theyre not supposed to share information with each other.
Four of the dealers cards are dealt face down and one face
up. At this point the player has two options: fold or raise. If the
player folds, he loses his ante bet. If the player decides to raise,
the bet must be increased by an amount equal to double the
ante bet.
After all player decisions have been made, the dealer flips
36

Contingencies

November/december

2000

House Edge and Strategies

STRATEGY

Optimal
Three rules of thumb
Raise on a/k/j/8/3 or better
Raise with matching rank
Raise on pair or better
Raise on ace/king or better
Raise on everything

HOUSE
EDGE

RISK
ELEMENT

5.22%
5.22%
5.32%
5.33%
5.47%
5.68%
16.61%

2.56%
2.55%
2.60%
2.62%
2.74%
2.67%
5.54%

over his hand. The dealer must have at least an ace and king to
qualify, otherwise those players who raised will win even money on the ante bet and the raise will push. If the dealer does
qualify, then the hands of the player and dealer are compared;
the better one wins.
If the dealer wins, the player loses both ante and raise. If the
player wins, the ante wins even money and the raise pays according to Figure 1.
In the unlikely event of an exact match, the ante and raise both
push. Theres also a progressive jackpot side bet available, which
doesnt depend on the dealers hand thats explained below.
Strategy

Caribbean Stud Poker is a difficult game to analyze. It takes a very

efficient program to analyze a complete cycle of almost 20 trillion hands and do so in a reasonable period of time. Fortunately, there are two absolute truths that cover 93.56 percent of the
hands. First, always raise with any pair or better. Second, always
fold with less than an ace and king. There are no exceptions.
Where strategy gets complicated is if the player has an ace
and king. Optimal strategy depends on the rank of the other
three cards, the rank of the dealers up card, and sometimes the
suits of all six cards seen.
Theres no simple rule of thumb that will correctly advise the
player how to play every situation. Its also not practical to waste
space with a large chart covering every possible situation. However, such a table is available on my website at www.thewizardofodds.com/game/carstudapx.html. By studying this table,
patterns and general rules emerge that will correctly advise the
vast majority of ace/king hands.
Raise if the dealers card is less than king and matches one
of yours.
Raise if the dealers card is an ace or king and you have a
queen or jack.
Raise if the dealers card doesnt match any of yours, you have a
queen, and your fourth highest card is higher than the dealers card.
If none of these conditions is met, then fold. The house edge
following these three rules of thumb is only .001 percent less
than that by playing optimal strategy.
Here are some other common strategies, listed from best to
worst.
Raise on ace/king/jack/8/3 or better: Professor John Gwynn
and Peter Griffin determined that this is where the line should be
drawn between raising and folding if the dealers card is ignored.
Raise on ace/king with any card matching the dealers rank:

Table 3.

Six Pay Tables

HAND

Four of a kind
Full house
Flush
Break even meter

TABLE 1

TABLE 2

TABLE 3

TABLE 4

TABLE 5

TABLE 6

$100
$75
$50
$263,205

$150
$100
$50
$246,784

$500
$100
$50
$217,047

$500
$150
$50
$176,613

$500
$75
$50
$230,363

$500
$100
$75
$201,245

If one of the players cards matches the rank of the dealers card,
then it lowers the dealers probability of forming a pair. The
player does not want the dealer to get a pair, beating his ace/king.
Raise on any pair or better: This is a risk-averse strategy that
may suit the player who wants to raise more confidently.
Raise on any ace/king or better: This strategy may suit the
gambler whos not concerned with volatility and is willing to
raise on sub-optimal hands.
Raise always: Otherwise known as playing blind. Some players raise on everything without even looking at their own cards.
This is a very foolish strategy; a player should never raise with
a non-qualifying hand.

seems terribly unjust to the second player, but its so unlikely

it probably hasnt happened yet.

House Edge

The game is played at a blackjack-size table with up to seven

players. Play begins with each player making three wagers of
equal size. Three circles designate where to place the bets. Five
dollars per bet is the usual minimum.
After all bets have been made, three cards are dealt to each
player. Two community cards are also dealt face down in front
of the dealer. Based on these three cards, each player in turn
must decide to take back one of the three bets or to leave all

Figure 2 presents the house edge and the element of risk for all
strategies discussed.
Progressive Side Bet

For an extra dollar the player can make a side bet that pays a
bonus if the player gets at least a flush. This bet pays regardless
of what hand the dealer has, and some view it as protection of
a good hand in the event the dealer doesnt qualify.
As players make their ante wagers, they may put a $1 token
in a designated slot. When all wagers have been made, the dealer presses a button, the tokens vanish, and a light designates
which players made the side bet.
A royal flush always pays 100 percent of the progressive meter, and a straight flush pays 10 percent. The payoff for a four
of a kind, full house, or flush varies from place to place. Figure
3 shows six different pay tables Ive seen and the break-even
point for the meter to be a fair bet.
Casual observation will show that the meters rarely reach
the break-even point; most of the time they dont even come
close. Typically, the meters stay in five-digit territory.
The bottom line is that its a sucker bet. The house keeps
such a generous cut of every bet made, about 29 cents, that the
progressive meter seldom has the opportunity to rise high
enough to give the bet a positive expectation. On average, once
every 649,740 times this bet is made somebody will get a royal flush and the house will have to reseed the meter, usually
with $10,000. But the expense of reseeding is minimal compared with the revenue generated between royal flushes. Based
on a 29-cent cut and $10,000 meter reseeding at the Casino
Niagara (which is typical of all casinos), the overall house edge
is 27.46 percent.
A little-known bit of information is what happens in the
event two players get a royal flush in the same hand. Usually
the rules will state that the player closest to the dealers left will
win the progressive meter and the second player will win only
$10,000, or whatever the casino reseeds the meter with. This

Let It Ride

Let It Ride is a fairly simple game based on five-card stud. The

players cards are revealed gradually and as the game progresses, the player may reduce his bet if his hand doesnt look promising. If the player has a qualifying hand after all five cards are
dealt, hell be paid according to the hand itself and the total bet
remaining. In addition, theres a $1 side bet available that also
pays according to the final hand.
Rules

Contingencies

November/december

2000

37

Figure 4.

Any four to an inside straight with four high cards.

Note: An outside straight can be complete on end-5, 6, 7,
or 8, lets say. An inside straight can be completed only one way,
for example 5, 6, 8, 9.

Let It Ride Payoff Table

HAND

PAYOFF

Royal flush
Straight flush
Four of a kind
Full house
Flush
Straight
Three of a kind
Two pair
Pair of tens or better

1,000 to 1
200 to 1
50 to 1
11 to 1
8 to 1
5 to 1
3 to 1
2 to 2
1 to 1

House Edge

The house edge in Let It Ride, defined as the ratio of the expected loss to one of the original three wagers, is 3.51 percent.
The element of risk is 2.85 percent.
Side Bet

bets alonelet it ride.

After this round, the dealer will turn over the first of the two
community cards. Then theres a second round in which each
player may pull back a bet or let the remaining bet ride. Finally, the second of the two community cards is turned over and
each player is paid according to the following pay table and the
players remaining bet.
The way to indicate that you want to pull back a bet is to
scrape the side of your three cards against the felt, like taking
a hit in hand-held blackjack. To stand, lay the cards face down
in front of the bets or tucked under one of them.
Strategy

With three cards the player should let it ride with any of the
following hands:
Any paying hand (pair of 10s or better, three of a kind)
Any three to a royal flush
Three suited cards in a row, except 2-3-4, and ace-2-3
Three to a straight flush, spread 4, with at least one high card
(10 or greater)
Three to a straight flush, spread 5, with at least two high cards.
Note: Spread refers to how many ranks the cards are spread
apart. For example, a 4, 6, and 8 would have a spread of 5 between the three cards and two gaps.
With four cards, the player should let it ride with any of the
following hands:
Any paying hand (pair of 10s or better, two pair, three of a kind)
Any four to a royal flush
Any four to a straight flush
Any four to a flush
Any four to an outside straight
Table 5.

Table 1: Lady Luck

Table 2: Las Vegas Club, Freemont, Californian, Plaza, Main
Street Station, Ballys, Circus Circus, Hilton, Grand
(Biloxi), Beau Rivage (Biloxi), Horseshoe (Tunica),
Grand (Tunica)
Table 3: Bellagio, Excalibur, Mandalay Bay, Harrahs, Imperial
Palace, Paris, Venetian
Table 5: MGM Grand, Golden Nugget
Table 6: Colorado Belle (Laughlin)
Table 7: Four Queens, Flamingo Hilton
Table 8: New York, New York

To learn about two more casino games, Spanish 21 and

Three-Card Poker, visit the Contingencies website at www.contingencies.org. For information about other games of chance
in the casino or gambling in general, visit Michael Shacklefords
website at www.thewizardofodds.com.

MICHAEL SHACKLEFORD IS ACTUARY AND SOLE PROPRIETOR OF THE

WIZARD OF ODDS CONSULTING, SPECIALIZING IN CASINO GAME
ANALYSIS . I N THE FIRST QUARTER OF 2001 THE W IZARD OF O DDS PLANS
TO BE RELOCATING FROM B ALTIMORE , M D. TO L AS V EGAS .

Let It Ride Side Bet

HAND

Royal flush
Straight flush
Four of a kind
Full house
Flush
Straight
Three of a kind
Two pair
High pair
House edge

38

Some, but not all, casinos allow a side bet of $1, for which the
player receives an additional payoff with certain paying hands.
To place this bet, the player puts a dollar in a slot on the table.
The dealer presses a button, the dollars vanish, and a light goes
on to designate who made the bet. The following table shows
various payoffs Ive seen. With a house edge as high as 36.52
percent, this is a sucker bet to be avoided. Note that if the side
bet wins, the original wager is not returned.
The following is a list of which casinos have which pay tables based on my small sampling. Unless otherwise stated, all
casinos are in Las Vegas:

Contingencies

TABLE 1

TABLE 2

TABLE 3

TABLE 4

TABLE 5

TABLE 6

TABLE 7

TABLE 8

$20,000
$2,000
$100
$75
$50
$25
$9
$6
0
13.77%

$20,000
$1,000
$100
$75
$50
$25
$4
$3
$1
32.73%

$20,000
$2,000
$100
$75
$50
$25
$8
$4
0
25.39%

$20,000
$2,000
$400
$200
$50
$25
$5
0
0
25.53%

$20,000
$1,000
$400
$200
$50
$25
$5
0
0
26.92%

$10,000
$2,000
$100
$75
$50
$25
$8
$4
0
26.93%

$20,000
$2,000
$300
$150
$50
$25
$5
0
0
35.14%

$20,000
$2,000
$300
$150
$50
$25
$5
0
0
36.52%

November/december

2000