Online Slots: Variance and Volatility

So we now know how a slot machine works and understand the importance of RTP we can beat the bandit, unfortunately now quite yet.

Anyone who has played a slot machine knows they have many different payouts, not just a jackpot like we have discussed. We would all love to see those 3 Jackpot symbols show up only to have to suffice with those 3 cherries.

This where slot variance and hit frequency come into play.

KEY TERM: Slot variance = Riskiness/Volatilty of machine. High Variance = High Risk and vice versa.

In probability variance is a mathematical concept used to express the spread of results, a high variance means a wide unpredictable spread where a low variance has a more predictable spread.

e.g. A trained sniper would shooting a target would have a low variance to the bullseye, whereas myself who has never held a gun would have a high variance.

KEY TERM: Hit Frequency = % of times machine should stop on a winning combination.

Generally increasing my hit frequency lowers my slot variance and vice versa but lets see this in practice.

Lets use our slot machine from previous example but only use one reel. A gambler can get any number from 1 to 100. I want to ensure my machine makes me money but I want to give the gambler more chance of winning. Let increase the hit frequency.

I am now going to give the player the following chances to win, this is often referred to as the paytable.

paytable chart

I have now increased the players chances of winning from 1 in 100 to 15 in 100 so a 15% hit frequency. You will notice I have reduced the Jackpot amount down to £25. This is because I still want to maintain a house edge. To check I still have this edge I am going to calculate my new RTP.

Alternative RTP calculation: Chance of Winning % x Winning amount £

e.g. Rolling a 100 on dice and winning £90 = 1% x £90 = 90% ( the same as previously calculated)

To calculate the total RTP I need to calculate the RTP for each winning line and sum the totals.

olcgraph2

You can now see why I had to reduce my Jackpot, if I hadn’t my RTP would have gone above 100% meaning I would make a loss.

The above pay table could be described one associated with a medium variance machine. Let’s now change the slot variance and see what effect that has. You will notice the RTP never changes which will be the same for real slot machines. Most machines will have a RTP between 85% to 95% but their slot variances can vary drastically.

LOW SLOT VARIANCE

Lets now reduce the slot variance or make the machine less risky to the customer. Low slot variance means there is less variance in results, i.e. I have more chance of winning.

low variance slot chart

You will notice I have now increased the hit frequency to 58% meaning the customer will now win something in more than half their spins. However it is key to notice that the maximum a customer can win is significantly reduced, now only a £10 jackpot. This is so I can keep my 90% RTP.

KEY LEARNING:      LOW SLOT VARIANCE = MORE CHANCE OF WINNING BUT SMALLER JACKPOTS.

HIGH SLOT VARIANCE

Let now increase the slot variance of machine, here I am trying to create a machine that is less predictable but offers the player the chance of larger winnings.

high slot variance chart

My hit percentage has now reduced to 11% but I am now able to offer the player the chance of winning £50 from one spin.

KEY LEARNING:      HIGH SLOT VARIANCE = LESS CHANCE OF WINNING  BUT HIGH JACKPOTS

Find High Variance Slots to play

SLOT VARIANCE IN PRACTICE

Let’s now see how these machines works in reality rather than theory. Using a random number generator against the above paytables I had 5 turns on each machine, each turn comprising of 500 spins.

The graphs below show the cumulative profit over the 500 spins.

Low slot variance machine:

low variance slot machine

High slot variance machine:

high variance slot machine

The previous graphs may look similar but when you overlay them you can see the difference is in the scale.

high vs low variance slot machine

This graph really demonstrates how the riskiness associated with the two types of machine variance relates to the expected return you can make.

With the low variance machines I was never more than £35 down (turn 3) but at best was only £34 up (turn 4)

With the high variance machine at one point I was £105 down (turn 5) but at one point was £75 up (turn 4).

We will see how this can be used in my slot strategy section.

IN SUMMARY:

  • Probability governs slot machines.
  • This probability dictates what RTP each machine is set at.
  • Slot variance determines our chance of winning and the amount we will win.

Now the problem! Most slot machines will not have this information on them but my slot machine reviews will give you all the information you need.

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