Mark Up

For those of you who don’t know, sometimes poker players sell some of their action. Say they want to play a £1,000 event but can only justify investing £500 from their bankroll they might sell £500 worth of their action. For example, if someone buys 10% of their action, they would be entitled to 10% of whatever they cash for. Mark up refers to a poker players price for their action. In the above example 10% would normally cost £100 but a poker player might sell their action at 1.2 meaning the cost would be £120. This is a very common transaction in the poker world, but since every player you ask is a winning or at least break even player, mark up sometimes causes a stir in regards to what is a fair price.

I’ve seen a lot of talk lately about mark up. My Facebook newsfeed often pops up with someone selling action and occasionally it causes controversy if someone appears to be selling too high. If you don’t like it don’t buy would be my advice rather than causing drama about it. But that aside, what makes a fair price?

When first looking at this subject I was almost exclusively a live player. If I played a £1000 tournament, that might incur expenses for travelling and hotels of £100. Since it costs me £1100 to put the bet on, selling at 1.1 so people get the exact same bet as me seemed fair.

I’ve chatted with a number of people, and it wasn’t until someone pointed out to me that one persons expenses might be especially high if they travel first class and stay in a 5 star hotel, that this isn’t the universal best way to go about it. Having always lived my poker life as a nit, travelling economy, booking in advance for the best price, staying in the lowest cost hotel that would still allow me to be comfortable, smuggling snacks into the venue, I never thought about other players spending lavishly. “I’m getting my bet on for the lowest price I can, you’re welcome to that same price” was my line of thinking.

As I got better at the game I started selling in regards to my own perceived skill level as well and I think this is the best way to look at it.

We need to look at the sellers return on investment (ROI). If you want to buy action from someone in order to make money, you need to buy at a lower price than their ROI. So if someone is selling at 1.2 but you think that for every £1000 they invest they will only return £1100 you aren’t on to a winning bet. They would need to return £1200 on average to break even. But who wants a break even bet?

Ideally, as a seller, you should sell at somewhere below your Perceived ROI. In the above example, if you sell at 1.05 then your investors are onto a winning bet and will hopefully buy your action, allowing you to play the competition that is out of your bankroll.

When it comes to live poker, rather than looking at the expenses, people can sell higher as long as their live ability gives them a greater edge. The greater edge comes from playing only 1 table at a time meaning more focus can be applied to their opponents and the picking up of live tells. If you know the person selling action has live leaks, such as watching movies on their iPad or having one too many pints the night before then don’t buy at the higher mark up!

So how do you know what someone’s ROI is? It’s a darn tricky thing to establish. For online poker there are websites that track a players results. However if you take me as an example, my return on investment on Party Poker is probably darn high because of a 1 off large result. If I only supplied my username from there it wouldn’t be a fair reflection of my ROI, for all you know I’ve lost a fortune on websites elsewhere (true story!)

For live it is even trickier as every buy in is not tracked. You can see a players results on thehendonmob.com but this only records instances of a player getting into the money, not their overall buy ins. I’ve cashed for over $900,000 according this website (thin brag) but this is no where near my net profit.

So to summarise, as a buyer, you may have a choice of who to buy from. It’s not the lowest price you are after, it’s who is selling the cheapest in terms of their ROI. If one player is selling at 1.2 and another at 1.1, the 1.2 player may be the best option if his return on investment is more than 10% greater than the other player.

As a seller, don’t be greedy (I’ve been guilty once or twice!) it’s better to sell too low and beat out the competition and ensure you get to play the tournament than sell too high and not sell the action at all. If you build a reputation of selling low and being a good bet, you’ll hopefully get repeat customers that will ensure your ability to play whichever games you like.