Two common methods to sell short-term action.
Markup is the percentage that is an a added premium to the list value of a tournament or tournament package.
Example - Player A posts a package of $2,000 and wants to sell 50% of his action. He decides on a mark-up rate of 1.2 (or a 20% premium) and therefore is asking for $1,200 for the 50%. He can break this up into pieces where each 1% would cost $24 ($2,000 * 1.2 X 1%). Effectively, player A only pays 40% of his package, but if he wins, he receives 50% of the profit. Any cashes would then subsequently be split on a gross basis. So if Player A cashed for $5,000 he would keep $2,500 for himself and payout $2,500 to all his investors. If Player A cashed for $1,000 he would keep $500 for himself and payout $500 to his investors.
Another method is just using a split such as 70/30 with the original stake being paid back.
Example - Player B posts a package of $2,000 and wants to sell 100% of his action with the original stake funds being paid back before profits are split up. He decides on of 70/30 split for each share and therefore is asking for $2,000 in total for 70% of his profits. If Player B wins $5,000 in the tournament, he would first payout the $1,000 buy-in and split the remaining $4,000 in a 70/30 split. Therefore he would pay out in this example $1,000 + $2,800 or $3,800. If Player B cashed for $1,000 in this example, he would pay entire amount out to his investors.
ok...so would anyone be willing to give me an easier explanation? Im very new at this and kinda need a "Staking for Dummies" approach.
you sell action and split based off the pre-determined percentage. 70/30 is not a good staking agreement in the previous example imo. basically you sell you action then pay out your investors based off the amount they bought of action. for instance if i sell 100% of my action for a tourney and agree to a 50/50 split. then my profits will be split 50/50, however, you also have to return the stake. so say i get 1k staked to me and end up winning the tourney for 7500. i would return the 1k stake leaving 6500 then this would be chopped 50/50 as well for 3250 to myself and my investor(s). Hope that helps.
50/50 is a horrible cut for the investor on just one tournament or a group of tournaments. This is typically the cut in a long-term arrangement with make-up. Basically a player would have to have a long-term 100% roi for 50/50 to ever be profitable for the backer, this is without even considering taxes. Backers won't have an expectation to make money even at 70/30 and the example if meant to be more realistic to be fair for backers buying action in profitable players should have been closer to 85/15 rather than 70/30.
I cant understand the math about the part where you talk about premiums, what would the equation be for like $20 stake and 10% premium?
Edited By: StrugLife Nov 27th, 2014 at 01:35 AM
i have a question in my mind,
what if somebody got stacking 100% and lose in all tourney because of tilt then what about the investors?
Is the buyin rake normally included when selling pieces?
I was thinking about selling for a $1,000 buyin but it is actually $1,115 with the rake. So should 1% be $10 or $11.15?
hey bro that should be 11.15$ as per the rule, why should you pay the extra cost associated with it.
What if I sell my actions on a 70/30 schema and I don't make the money?
Man I have been playing poker for years, sold action and played as a backed player, and I'm quite confused from this explanation.
In the second example "Player B" sells a $2,000 package, but is only investing $1,000 later in the example. He's also selling as a 70/30 split, but you claim 80% goes to investors, rather than 70%. Have I missed something or is this an error?