Casino essentials: the house edge and the house drop

If you plan on playing negative EV games in a land based or an on line casino, you need to make sure you understand exactly what the odds involved are. Sure there’s a house edge that that everyone’s talking about, but you may not know it that the House Drop is what you really need to be afraid of.

The house drop or house hold is an extremely sneaky concept, and it’s exactly what the casino’s revenue stream is based on.

While on roulette, the typical house edge is around 5.5% (on 00 ones), the house drop is between 21-30%.

Let’s take a look at an example here. A player walks into a casino with a $100 bankroll, to play roulette. He decides he’s always going to make $1 bets only, and see what happens. After he makes his 100 $1 bets he’ll still have money left despite the fact that the 5.5% house edge has worked him over already. He decides to continue playing, and places 150 more $1 bets before he stops and decides to call it the day.

He made 250 $1 bets on his $100 bankroll. Each and every one of those bets subject to the 5.5% house edge. He doesn’t pay 5.5% on his initial bankroll of $100. He pays 5.5% on the $250 that he wagered.

If we consider that people can walk into a casino (in theory) on a $1 bankroll, it means they’ll be generating a house drop right away to top the house edge off. The more bets they make, the bigger the house drop they generate. If they stay long enough to lose all their money (which is only a matter of time) they’ll have generated 100% house drop.

The only way to win on negative EV games is to take advantage of the variance. As soon as Lady Luck smiles on you, just take the money and run.