Variance, what is that?
Let me start off with the fact that volatility is synonymous with variance, so if you’re also wondering what volatility means, you’ve come to the right place.
Variance has everything to do with probability, and probability calculation, of course, has everything to do with (online) slot machines. In mathematics, the variance is a measure of the dispersion of a set of values, i.e. it indicates the extent to which values differ from one another. With a low variance, these values are fairly close to each other, and therefore also fairly close to an average. A high variance, in turn, means that the values differ a lot from each other and therefore fall far below or above the average.
If you translate this to a slot machine, the values are the winning lines that an online slot machine has and the corresponding winnings. In addition to this, you should also take into account the times that you don’t win on a slot machine. Imagine 100 spins on a slot machine. 99 spins you win nothing and on one spin you win 96x your bet. You could say this looks like a slot machine with high variance because 96x your winnings and 0x your winnings are values that differ a lot.
For example, a low variance slot machine would give you 4 spins with 0x your bet and 96 spins with 1x your bet. This is, of course, a very basic example but it gives a good first impression of variance in a slot machine.
Variance vs Random Number Generator
The outcomes of online slot machines are determined via a Random Number Generator (RNG). In a nutshell, an RNG is a computer program that ensures that the outcome of a game remains fully random. The RNG cannot be influenced by the casino or by the player and is impossible to hack, so the game remains fair. As a result, there is a certain chance of winning behind every possible outcome of the slot machine. Since certain outcomes result in the same winnings, you can add up the odds of those results and this will tell you the total odds of those results.
For example, take a die with six sides. The probability of throwing one of the six numbers is 1/6, so percentage-wise 16.7%. Now suppose you bet money on rolling the die, and the number 1 and the number 6 double your money. If you add up the chance that you roll one of these numbers, you get a 33.4% chance, so that’s the chance you have to double your money. Variance has everything to do with the size of the possible winnings and the chance of these winnings, in other words, the spread of the values.
Slot machines with high variance
To fully understand the concept of variance in combination with an online slot machine, we outline a 100,000 spin scenario. Take a slot machine with an average Return To Player (RTP) rate of 96%. This means that if you play 100,000 spins of €1, you are likely to win around €96,000. Of course, this can vary, either downwards or upwards, as it remains a probability calculation.
Now imagine a slot machine where, with a bet of €1, you have a 0.1% chance of winning €90,000. This means that after 100,000 spins, the odds are quite high that you will win that €90,000 once. But then there is only €6,000 left to win, which is spread over the remaining 99,999 spins, so there will be a lot of spins where you win nothing and a lot of spins where you win low prizes.
Slot machines with low variance
We’ll take the same example as above. We bet 1 euro at a time on every spin and we spin 100,000 times on a slot machine with an RTP percentage of 96%. This means we have €96,000 to distribute over 100,000 spins. However, this slot machine does not have a €90,000 jackpot but pays out €9 at an average of every 10 spins. In addition to this, it has a number of other low prizes that are won frequently, leading to the RTP percentage of 96%. So you have a good chance of winning something, but there won’t be any extremely large winnings in between.
Variance types in short
- High variance: An online slot machine with high variance often pays out a lot of smaller prizes and every now and then a very large profit. So as a player, it’s either lose money fast or win a lot.
- Medium variance: An online slot machine with medium variance is less likely to pay out prizes than a high variance machine, but when they pay out a prize the prizes are higher. This way you don’t lose your money as quickly as a high variance slot machine, but you still have a chance to win a good amount of money. The maximum hit, however, will never be as high as on a high variance slot machine.
- Low variance: A low variance online slot machine will pay out even more often, but not a lot of very high prizes. In terms of excitement, you will have to sacrifice a little on this slot machine, because real big hits will probably not happen. This is more about low-risk gambling and you’ll spend a lot more time with your money than you would with a high variance online slot machine.
How do you estimate the variance of a slot machine?
First of all, of course, you can look at the number of winning lines in the game. This says something about the variance because the more winning lines there are, the smaller the winnings will be. However, this is not the whole story, because the average winnings can of course remain so low that there is still room for that mega-hit you’re chasing for.
What is also a good indication is the maximum bet an online slot machine has. You can imagine that an online casino is not a big fan of paying out millions. If the maximum bet is very high, an extreme multiplier of your bet will result in extremely high amounts of winnings, which the casino rather not wants to happen. For this reason, a slot machine with a high maximum bet is most likely not a slot machine with a high variance. However, there are always exceptions.
The payout table also provides an indication of the variance. In the payout table, you can see what each winning combination yields. If you can get low prizes with the most winning combinations, chances are you are dealing with a slot machine with low variance. But again, there are definitely exceptions to that rule.
An exact approximation of the variance
If you want a more precise approximation of the variance of a particular online slot machine, then you should play the free versions of that slot machine. Any mathematician would tell you that in probability calculation the following rule applies: the more often you take a test, the more the results will reflect the actual distribution of the odds. If you roll the die six times, probability calculation will tell you in advance that you will roll a 1 (probability of 1/6 * 6 throws) once, but in practice, of course, this often deviates. When you roll the die a thousand times, then the actual results will already approach the outcome of the probability calculation more, i.e. that each number will be rolled 1/6 * 6 times. If you roll the die a million times, you will approach the outcome of the probability calculation even more, etc.
Back to the slot machine, because I don’t know about you but I don’t have any die at home that pays out money (unfortunately). If you have the time and really want to know where you stand before betting your money on a certain game, then play the free version of the online slot machine that you have focused your attention on. Play it at least a few hundred times and keep track of the results each time. The more times you play, the better you’ll understand the actual variance. If you often don’t win anything and occasionally win a big prize, the variance is higher than if you often win a small prize.
From low to high
Then of course the question remains, what degree of variance suits you as a player? As mentioned before, an online slot machine with a low variance has a lower risk because you are more likely to get a small win. As a result, you’ll spend more time with your money and will automatically have a better chance of taking one of the more fun winnings from that game. However, the biggest winnings will never be as high as other high(er) variance slot games. If you’re taking more of the risk and low variance is too boring for you, then you can take a step up to slots with medium variance. This is a nice balance between mitigating the risk and still having a chance of a nice win. Slots with high variance are mainly for the more experienced players, and for players with balls of steel. Here, your money may quickly disappear right in front of you and it’s all about catching that big win.
If you don’t know yet what kind of variance best suits your style of play, you can always try the free versions of a number of online slot machines with different variance. Sometimes you can find out on the internet what kind of variance a particular slot machine has and otherwise in this article you’ve been given some good guidance on how to determine the variance yourself. Have fun playing!
