How to Stake – Investing in Poker Players

Poker isn’t stable income.  Every player goes through rough patches where they lose even though they’re playing correctly.  You can’t eliminate the variance in poker, but you can hedge against it by buying a piece of another player.  This is commonly called “staking” another poker player.

When you invest a portion of your bankroll in other players, you diversify your risk.  Therefore, staking other solid players can be an important part of your overall poker bankroll strategy.  But how do you know you’re not just throwing your money away?  Here’s how to invest in poker players intelligently.

Know Their Win Rate

What’s the poker players win rate?  This win rate is similar to the coupon rate of a bond in that it gives you an idea of how much money you’ll get from investing in the player.  Some players may have a 10% win rate while others have a 25% win rate.  Does that mean the second player will give you a better return on investment? Maybe.  There are other factors to consider.

How Much of a Premium Does the Player Charge?

Players usually don’t give even money deals.  After all, the player wouldn’t make any money if you gave the player 100% of the entry fee and they gave you 100% of the profits.  Usually the staker pays 100% of the entry fee and gets 50% of the profits.  Here’s how that deal affects your ROI.

Players ROI= 20%

Entry Fee= $100

Expected return= $100 x 1.20 = $120

Your take= $110 [$100 investment +($20 winnings/2)]

Your ROI=10%

That’s a pretty basic scenario, but in practice things are a bit more complicated.  Here’s a real-life example of how to calculate your ROI from a staking offer:

The player is playing a $163 tournament and is offering 2% shares at $5 per share.  This player has an approximate ROI of 56% over 231 tournaments.  What is your expected ROI from investing in this player?

163(buy-in) x 1.53 (ROI w/buy-in) = $249.39 expected winnings

$249.39 – $163 (buy-in) = $86.39 profit

$86.39 x 0.02 (your take) ~ $1.73 + $5 (initial investment) = $6.73(your total take)

Your ROI = 1.73/5 = 34.6%

So over the long haul, you can expect to make 34.6% on your investment when this player offers a similar deal.

Other Considerations

Remember that investing in other players is risky.  You lose your entire investment if they don’t money.  If you plan on investing in other players, make sure you have enough money to buy at least one share in 100 different events and preferably with at least 20 or 30 different players.  Diversification is the key.

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Staking other players can be a great way to supplement your poker income and help you weather personal poker bankroll downswings.  It’s also likely that the players you stake will want to stake you too.  As long as you do the math and make smart investments, your stakes can be very profitable.

 

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