Hypothetical Question re: bankroll

[webiggy]

Let's just say that I have $10,000 to commit to playing poker for all activity - ring games, tournaments, live and online. Is this enough seed money for playing professionally (assuming your game is solid) and if so, how would you allocate it?

[slavic]

no, it's not enough. Just as a good rule of thumb for any private venture that you hope to live off of. You need at least a years wages saved up to live on over and above your working bankroll. That doesn't mean you can't do it but your risk of ruin will be quite high.

[fluff]

That is an ill defined question.

At the very least you have to know what limits? What's your risk tolerance? What's your win rate and SD? How much do you need to live off of?

[webiggy]

Maybe this will help. Assuming that I have 6 months of living expenses set aside plus another 1.5 years of living expenses working in investments, will the $10K be a reasonable amount of risk capital should I decide to play low limit 3/6 to 5/10 both online and live. Let's further assume that all I really need to make playing poker each month is about $2 to $3k.

Is that enough info?

Oh and assume a win rate of 1 to 2 BB with an SD of 15 to 20 BB

[fluff]

Yep, we can work with that. So here is the equation you need, courtesy of BruceZ:

B = -(sigma^2/2u)ln(r)

r = exp(-2uB/sigma^2)

where u is your hourly rate
sigma is your hourly standard deviation
r is your desired risk of ruin
B is your bankroll

Now lets get the numbers we want:

Lets assume you're willing to shoulder a 5% risk or ruin. This is the chance that you will go completely broke even when you play winning poker at your current WR and SD.

Next is your win rate. Let's say that your gross WR is 1.5BB at a 5/10 game, and you play 200 hours a month. That means your expected profit at the end of the month is $4000 (1.5BB/hr*200hr*$10). However, you want to take out $2000 of this every month (and probably more, for taxes) . This effectively reduces your win rate by 1BB/hr: you need to substract $2000/200hr out of your win rate, ie $10/hr or 1 BB/hr. This clearly means that if your gross win rate at 5/10 is actually 0.5BB/hr. If your net WR is actually 1BB/hr instead of the 1.5BB/hr we assumed, then after taking out your income, your WR is actually 0. This also assuming you actually intend to work 200 hours. If you work less, your win rate will go negative. This usually is a pitfall for many when calculating their risk of ruin, because they don't realize that your WR has to be adjusted for money you take out of the BR.

Anyway, for the purpose of this calculation let's say you make 0.5BB/hr after you calculate your expenses and income, and lets go with a 15BB/hr SD.

Ok, we have everything, plug it in, and you get a BR requirement of 674BBs or $6740. So $10,000 is probably a good start.

Remember however that we made some generous assumptions, ie. working 200 hours, not taking out taxes, and an SD of 15. You should adjust accordingly, and most importantly be honest about your gross and net win rate.

Also, if you plan on multi-tabling, and increase your hourly win rate because of it, remember to also adjust you SD by SD*sqrt(number of tables).

Hope this helps!

[webiggy]

[ QUOTE ]

Also, if you plan on multi-tabling, and increase your hourly win rate because of it, remember to also adjust you SD by SD*sqrt(number of tables).

Hope this helps!


[/ QUOTE ]

That's helpful, but re: the above, should my bankroll be increased to support the higher volume of play, as I would assume that the risk tolerance should be adjusted accordingly.

Also, one question that wasn't asnswered, how should one allocate his investment - online v. live play v. idle cash for whoring?

[fluff]

Well, if multi-tabling, you estimate what your increase WR is. Suppose that 1 table you get a 1.5 BB/hr WR, but on two tables you get 1.2 BB/hr per table or 2.4 BB/hr. Now substract your "salary" of 1BB/hr and you end up having a net WR of 1.4 BB/hr. Your SD on two tables is 21 BB/hr. Then to get the same risk of ruin (5%) you only need 471 BBs. Or if you have the same BR as before, your risk of ruin becomes smaller (by a something like 2 percent). You just have to be honest in estimating your net win rate and how much it goes down when multitabling, which can be difficult. Also remember that you need a lot of hours to predict your winrate, up to 3000 hours to get it within 1 BB, and up to 12000 hours to get it within 0.5 BB. When in doubt, always underestimate your win rate.

As far as asset allocation, personally I would emphasize on-line for the common named reasons: Easier to find games (more time spend actually playing), no tipping and lower rake(increases your effective win rate), faster games, multitabling, etc.

But a lot of people like to go to B&Ms for the love of the game (and in some cases, because the games are actually softer). Just have your BR in a bank account (a separate checking account for your BR, linked to Neteller is a good idea), and access it as necessary.

I don't know much about tournament play, so can't really give an informed opinion on that. I know that they have greater variance, especially the huge multi table ones, so probably best to keep this as a side interest.

Finally the question of Bonuswhoring. Being a bonuswhore at heart, I highly recommend it! A lot of these bonuses clear at a rate of $8-$12/hr (Party&skins, Crypto&skins). So that is effectively a subsidy of 1BB/hr for a 5/10 player. And anytime someone is guaranteeing you a net increase of 1BB/hr, you should probably take it. If your BR is mainly in Neteller, there should be no problem moving it around as needed.