A Guide To Staking Deals

[jrspm]

Since I’m doing a fair bit of staking at the moment I thought I’d write out a basic guide to some of the different deals that are worth thinking about when you are asking for stakes or backing players.

All of the types of staking I will cover have a place, some are better than others of course, but they mostly depend on the situation, the player and sometimes the buy-in or stakes being played.

The Straight Percentage

The first and most obvious staking deal is the straight percentage. This is commonly used when someone wants to quickly reduce their variance in a single tournament. The player will ask if anyone is interested in staking them for a set percentage, and pay out that percentage as a proportion of any winnings.

Example: Jrs is playing in a $530 tournament and wants to sell 50% of his action. 5 people agree to back him and buy 10%, each paying $53. If he doesn’t cash then the backers receive nothing. If he cashes for $4,000 then each backer will receive $400 for their $10 stake.
This is a fairly simple way of staking, and can work very quickly. These types of deals often happen on IRC between players in the run up to tournies like the Sunday Million and FTP 750k.

The Swap

The swap is very much like the straight percentage, with the only difference being that any player who cashes will usually be paying out only a percentage of their winnings, otherwise they’ll be paying out part of their buy-in and the non cashing player would effectively be ‘winning’ that percentage of the players buy-in.

This can also be done in groups of 3 or more players, but starts to get a bit too watered down with any more than 5 or 6.

Example: Toro and TP decide to swap 10% in the Sunday Million. Toro runs hotter than Jesus and cashes for $2,100. He first removes his buy-in ($215) then applies the 10% to his winnings ($1885) and pays TP $188.50.

The Series

This is a deal many ITH’ers will know as it’s been highly popularized my MX. The idea is that a player is backed for 100% to play a series of tournaments. In a typical deal the player will ask for 50 buy-ins to a tournament and sell off their action in blocks of 5%. The player then takes a percentage of the profit (Usually between 50-70%) and if they make a loss the remaining money will be divided up and paid back to the backers according to their percentage.

Example 1: MX offers 100 shares of $10 each to play a set of 50 tournaments with a $20 buy-in. He sells the shares at a 60/40 split in favour of the backer after stakeback, and ends up running his $1,000 seed fund up to $2,800. He first gives his backers their $10 per share back from the first $1000, and then he distributes the remaining $1,800 with the 60/40 split, so he takes $720 for his efforts and pays out a profit of $10.80 on each of the 100 stakes.

So if someone bought 5 of MX’s shares for $50 they would receive a return of $104. ($50 of which is their stake being returned, and $54 of profit made up from 5 x $10.80 from each share.)

Example 2: MX’s offers the same deal as above, but runs really bad, making a loss of $300 from his initial $1,000 seed fund. MX pays out $7 per share to his backers and receives nothing for his efforts. A player buying 5 shares would receive a return of $35 or 5 x $7.

The 100 % Stake

This deal is commonly offered by better known players or those who can prove a consistent ROI. As an alternative to the straight swap, these players are still offering their backers a +EV situation, even if they don’t return a full 100% of the action they have paid for. These deals almost always include stakeback.
Sometimes people will also offer this deal when selling 50% of their action, but the examples are easier t demonstrate with a 100% backing scenario.

Example: Yankees is playing the $1,000 buy-in event at Caesars Palace. He offers 100% of his action on a 70/30 split.
10 people agree to stake him $100 and Yankees cashes in the tournament for $3,200. He first pays back the $100 to each backer to pay the $1,000 stake back, and then he applies the 70/30 split to the remaining $2,200 which means $1,540 is paid out to the backers, who each receive $154 in addition to their returned stake for a total of $254. Yankees takes his cut, which is 30% of $3,200 - $1,000 =$660.

In this example, if Yankees doesn’t cash, nobody receives any returns, as it’s not possible that any portion of his stake remains.

As a backer, these deals aren't the greatest around. The player is selling their action at a higher price than it would be sold for in a straight swap because they believe they are selling themselves short by simply offering a straight percentage. As a player it may be more difficult to get backed this way, as most backers will take into consideration both the premium they are a paying for your action, and the fact that the absorb 100% of any losses which won;t be paid back if they stake you in future and you cash.

That being said I have recently backed a fair amount on deals like this, probably over $2k, because a) I want to gamboool. b) The players were +EV, and playing for potentially huge returns and c) I like to get involved with players in the community, and follow their progress. Backing them makes it much more fun.

The Makeup Deal

These deals are very popular, but don’t receive as much exposure on the forums at ITH as they are usually discussed in private. In fact, of the 4 or 5 times I have staked people on makeup deals at ITH, all of them have been discussed by PM or on IRC/MSN.

The idea is basically that an agreement is made between the backer and the player for the player to play tournaments (and less often cash games) and will pay back any losses incurred when they cash, before applying whatever chop of profits they have arranged.

The main reason for this type of deal is that during a set of tournaments, lets take MX’s example for a good demonstration, the backers take all of the losses incurred, without those losses being paid back when a profit is made in a future set.

So if a player is backed for 50 tournaments at $10 and loses all of them, the backer loses the full $500. Then lets say they start a second, separate set of 50 tournies based on a 60/40 split and they finish up $500 on this one. The player will receive his 30% cut ($200) and the backer will make a profit of $300 on this deal, but was down $500 from the previous deal, so is actually down $200 overall, while the player they are backing is in profit, and playing with no risk.

I’d just like to point out that I’m not trying to take anyone’s action away by pointing this out. I know Nside posted a fairly detailed break own of this a while back, which can be found here.

I’d also like to point out that I have backed MX in every 180 challenge he’s done, as he is both +EV and great value entertainment. It’s also the case that a makeup deal wouldn’t work in that situation, as different people back at different times, and not everyone wants to carry on with the same deal.

Makeup deals are fairly common for backing players into larger buy-in tournies. A good example of a current and widely known deal is the one between Timex and Bond18 over at 2+2. Timex has been staking Bond for a while, and although he’s had a few small cashes, Bond was somewhere in the region of $80,000 in makeup.

This means that he had played tournies to the value of over $80k, and his deal dictates that he pays back that money before he actually makes any himself. This means he could have made the FT of a WSOP event, cashed for $65,000 ad not actually make any money, and still be in $15k of makeup.

Anyone who knows Bond, or reads his blog or posts will know he’s a good player, and he’s recently won a $3k event at the Bellagio for $194k. So from that cash he’ll be handing $80k over to Timex and taking whatever percentage of the remainder for himself. I don’t know much about his personal situation, but this is obviously a great deal for Bond, as it allows him to play risk free, and probably take a lot more variance than he would be able to with his own bankroll.

Obviously if you're me and your backers run hotter than the sun, they'll only be in makeup for about a week before they start making you money (or indeed, cash for 800 buy-ins in their first tournie). The downside is once the period or terms you discussed come to an end, they have often built up enough to go it alone

These deals do sometimes go wrong though. In many cases the players are entrusted with a substantial amount of the backers cash, which has obvious risk. Less obvious in that some players intentionally play badly when deep in makeup, so that their deals will get cancelled and they can start fresh, either with their own bankroll, or by getting another deal with someone else.

There were a few stories floating around in Vegas last year about players who were so far in makeup that they were intentionally busting out of WSOP events early. I would never condone this of course, but you can see why some players to do this, especially as they are giving up a lot of their time and maybe can’t see an end in sight. This kind of thing really shows that there needs to be a good relationship between the backer and the player, and that a great deal of trust is involved. Ideally you want to be backing people of good character that you know and trust, as much more can go wrong with these deals, and your exposure as a backer is typically higher.

It’s turned into a fairly long breakdown, but I hope this helps. There are probably plenty of things I have missed, in addition to examples that could be added. Feel free to let me know if you think anything else should be on here, and I’ll edit the post.

This is just a basic guide and you should always do research into both the player and the deal before entering into any staking arrangements. It's worth only staking people who you know and trust, and sticking to players who are well known.

When asking for stakes, always be as clear as you can on what you are offering. This makes it much easier for any potential backers to consider your deal, and also avoids any confusion between the parties involved. A post that outlines what you intend to play, how much you wish to sell and under what terms is far more likely to be successful than a post that simply says 'I wanna play the Million, anyone feel like backing me?'

For a fun (and currently very underused) way to enjoy swapping stakes in tournaments, check out The Slug Thread.

[MXRider]

delete away!

[toom]

Agreed on the sticky, and done.

We now have five at the top, looks like I need to do some editing.

mx, I'll soon be deleting your reply to this thread (and mine) in the name of keeping the stickies clean.