What is Stakeback?
Some people prefer events where all backers (buyers of shares) in an event are paid out their initial investment before any profit is split.
This alters the payouts for an event and is generally better for the buyers (and so worse for the sellers).
The actual formula to do this is given as:
- Let A = % of profit backer receives per share
- Let B = % of initial buyin that each share costs
- Let C = Total money needed to play event
- Let D = Amount of money cashed in the event
If (D < C), then each share gets B * D
else each share receives B * C + [A * (D – C)]
As a quick example of how this affects payouts.
e.g. $140 buyin event, shares worth 1% of the event are sold for $2 (143% price/value). The seller wins $300.
With no Stakeback the buyer would win 1% of $300 = $3.
With Stakeback the buyer wins (($2/$140)*140 + [1% * ( $300-$140)]) = $3.60
In the situation where the buyer wins less than the amount needed to play the event, the calculations can be confusing. For a more comprehensive examination of how this works with plenty of examples please the forum topic here
To confirm the calculations for your event, use the ChipMeUp Stakeback Calculator
- Thanks to vicy8
for the formula used above