CONFESSION/ A Cautionary Tale or newbies.
What your level of Risk Tolerance is varies from what mine is and from what any random person's is.
R.O.R. is a very fine example of what economists and mathematicians term a "UTILITY" function.
If I am rich and my bankroll is easily replenshed I may tolerate a very high R.O.R. - perhaps as high as 20%
If I am a working stiff and/or a person who cannot tolerate (emotionally) the idea of being "broke" I would be looking for a R.O.R. that is quite low - perhaps even as low as 2%
If you have a bankroll of $5,000 and I offer to bet that if YOU flip YOUR coin and YOU call it correctly I will pay you $6,000.
You have a higghly profitable 20% advantage.
That is spectacular, but the RISK is so high [50%] that putting all of your bankroll at risk would be folly - unless it is easily replenished and you would not lose sleep if you lost.
There is more than just "advantage" to consider when betting.
The Kelly Criterion actually uses a R.O.R. of 13.5% - which is precisely why so many pros use 1/2 (or even 1/4) Kelly Betting.
Thinking about your Risk of Ruin, your e.v. plays into this but not by as much as one might think. Your bet spread is crucial. The wider the spread the greater the risk, even though the expectation will be higher. The most important factor of all is what % of your bankroll your top bet is. The tradeoff of risk vs. reward is crucial. Profits are inversely proportional to Risk in investment matters. Ergo, GREED KILLS !
Blackjack is a high variance game, meaning the Standard Deviation can be very high - resulting in perfectly "normal" situations where you can win or lose very very large sums even with a modest spread.
A Confession:
When I began to play seriously I won over 1/4 million bux in my first year, with an aggressive 25-1 spread at a fine shoe game with an expectation off-the-top of -.31.
I was so "full of myself" that I thought that I was invincible. I went to Las Vegas with a cash bankroll of more than $300,000. I found a good DD game and promptly lost $96,000. How did I do that I spread $1,000 to $10,000 and at times actually bet three hands at a time at 10K per spot. THAT was IDIOTIC. Nobody in his right mind has a Max bet of over 2% of their (total) bankroll. If your bankroll is a healthy 1,000 units a Max Bet of 20 units would be 2% So, at a $10 game that would be $200. Plenty !
If my Max Bet was 2% I could have spread as high as $6000, not multiple hands of $10,000.
In retrospect I imagine that my Risk of Ruin was well over 40% - Years later I would strive for R.O.R. well under 10%.
So, I really should have spread $500 to $3,000.
Almost needless to say NO casino will accept more than a 6-1 or 8-1 spread on a DD with good rules from even a (semi- skilled) Basic Strategy player.
My DD skills were not that powerful 25 years ago. They were very sloppy.
If they weren't sloppy they would have thrown me out, (and saved me a bundle). Aaargh!
It would be a long time before they would TRESPASS me at that well-known whale-habitat.
