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Quatloos! > Quatloosia! > Quatloosian Guide to Gambling > Craps > Parity Hedge System

Craps: The Parity Hedge System

This is the forgotten system that took the gambling world by storm for a few brief weeks in the early 1970s. After we first mentioned the Parity Hedge System in 1998, we have received literally thousands of e-mails requesting more information about the system, who developed it, why it never became public information, and what happened to it.

The Parity Hedge System derives in part from the Doey-Don't System immortalized in Frank Scoblete's classic book: Beat the Craps Out of the Casinos and Play Craps and Win, p. 39 (Bonus Books, 1991). You have to understand what makes that strategy successful before you can delve into the intricacies of the Parity Hedge System.

The Unofficial History of the Parity Hedge System

The originators of the Parity Hedge System were too smart to make themselves known. It is believed that they were nuclear physicists and theoretical mathematicians who were working at the Nevada Test Range, located just north of Las Vegas. During the daytime, they put their skills to the test by creating new and unusual types of hydrogen bombs and measuring their yields. In the evening, they made their way into Las Vegas where they put their statistical know-how to the test on the Blackjack and Craps tables. This was a group of very sharp young minds who had studied under such geniuses as Von Neumann and Teller, and who knew how to "think outside the box".

Whether they picked up the Doey-Don't from other gamblers, or they figured the system out themselves is not known. At any rate, they quickly realized the nearly risk-free arbitrage nature of the "DD", and in their slack time at the test range began to theorize about how to improve on the Doey-Don't. Eventually, they were to develop their strategy into a situational algorithm that is much like a basic computer program. Depending on the situation, betting a certain way will either slightly improve the odds, or will negate odds that have become heavily in the house's favor.

Realizing that an overly-complex system was unworkable with a fast-paced game such as craps, these kid geniuses simplified the system into the "11 keys" that characterizes the system. They also realized that if the casinos ever figured out the Parity Hedge System, the casinos could make slight rule changes to negate the system's advantages (To jump ahead for a moment, they were wrong - even years after studying the few film tapes of people using the Parity Hedge System, the casino's mathematicians were unable to crack the system, and so no changes were ever made. But the casinos were to handle the matter differently, as we will soon relate).

Of course, the kid geniuses tried to keep the system to themselves. They wouldn't play when other experienced gamblers were around, but played only in the early morning hours while the least knowledgeable security crews were working and most of the casino personnel were focused on clearing the slot machines' take from the previous night. They made small bets, and were for awhile content to supplement their government salaries with repeated small but consistent payoffs.

But greed begets greed. As détente and the nuclear arms accords began to spell an end to many of the nuclear testing programs, some of those knowledgeable about the system began to think of ways to make a really big "hit" on the casino.

The Parity Hedge System gives gamblers a slight edge over the casino. For small bets, this means small gains. Bigger gains requires bigger bets, and bigger bets attract more attention. And the kid geniuses did not want their system to go away. But they didn't want to retire on their government pensions, either.

Eventually, they settled on a Japanese businessman who they knew through their defense contacts. The Japanese businessman had cash and the mathematical skills necessary to run the Parity Hedge System on a big-time basis. More importantly, the Japanese businessman was already known around Las Vegas as a "whale" who regularly dropped tens of thousands (remember, this was the mid-1970s) on a single weekend - and even better the casinos knew him as a "hard luck" gambler. If the Japanese businessman suddenly started winning, the casinos would figure that his luck had simply changed and it would not attract attention.

So it was that on one of his many trips to Las Vegas to oversee a construction contract that the kid geniuses took the Japanese businessman aside, and over the course of a weekend had instructed him in the "basic" Parity Hedge System.

Early on the following Monday morning, during the casino's most quiet time, the Japanese businessman made his way to the crap table, took over an end, flopped down $10,000 in cash, and started working the system. At first, the crew working the table and the boxmen thought we was nuts, playing "offsetting" bets that seemingly couldn't win. Yet, of the course of an hour and a half, the Japanese businessman had very quietly doubled his money.

It had been decided beforehand that the Japanese businessman would spread his money around several casinos, and so he did for the remainder of the week always playing around the breakfast hour. He lost on one day only, and then by little more than $200 after an hour and a half of play. The Japanese businessman concluded his first visit up more than $15,000 - of which he split $7,500 with the kid geniuses, as well as a promise to return. Everything had gone so smoothly that the casinos hardly took notice of the Japanese businessman's suddenly improved play.

The kid geniuses continued to perfect the Parity Hedge System, sublime in the context of doing this over coffee while measuring underground atomic tests. But they awaited the Japanese businessman's return, and their big payday.

The Japanese businessman played the role well, waiting until the several casino's inevitable calls inviting him to return. He at first refused, and then acquiesced on the condition that the casinos would allow him to play craps at a very high dollar amount - placing up to $10,000 per roll. The casinos were probably overjoyed when they heard this, and assured him that if he could bankroll it, they would take his money. So, the Japanese businessman took the time to schedule another "construction visit" to the Las Vegas area, this time wiring to each of these casinos a large sum (believed to be around $600,000 each). Thus it was that the Japanese businessman landed in Las Vegas on a Thursday, stayed holed up in his hotel room through the weekend (except for a brief visit to the Atomic Test Range), and then showed up at precisely 6:00 a.m. on Monday to start gambling.

And gamble he did. Helped by an enormous streak of "good numbers", the Japanese businessman was up $1 million by breakfast. He then spent the day making a circuit of the other casinos, only losing once and cleaning the rest out for amounts up to $2 million. At the end of the day, by making progressively bigger bets with the casino's money that he had won, the Japanese businessman was ahead a cool $11 million.

Nothing travels fasted in Las Vegas than the news of a big winner. While each casino had "spotters" on the Japanese businessman - more looking for ways to lure him back to their casino when his run of "luck" finally broke - the casino bosses were meeting with their staffs to try to figure out what had happened. Keep in mind that at this juncture in Las Vegas' history, the casinos were being run mostly be ex-mobsters (and some not-so-ex-) and they simply couldn't grasp the Parity Hedge System. For his part, the Japanese businessman greeted his casino-appointed hosts cordially, and retired back to his hotel room.

Truth is, he should have taken the first plane out of town. Instead, he again appears promptly at 6:00 a.m. the next morning, per the kid geniuses' plan, and starts gambling at the highest limit (which, of course, the casinos let him do to try to get their money back). Again, the combination of his lucky streak, the Parity Hedge System, and that he was now using the large sums of casino money he had won the day before, resulted in gains of just under $10 million at each of a half-dozen casinos in town.

By this time, the casino bosses are really starting to panic. In the mid-1970s, a $10 million loss was unthinkable. Because there was still a great deal of "skimming" going on, the casinos basically had no cash reserves. Fortunately, the Japanese businessman had deposited his winnings with the casino at the end of each day as credit for the next day.

The casino bosses still didn't understand what was happening. The first thought in their paranoid minds was that the Japanese businessman was cheating. By this time, the Japanese businessman was being watched by probably 20 or 30 people at each casino, so that was unlikely. The casino bosses simply couldn't get it through their minds that there was some system that gave the Japanese businessman a slight advantage over the house.

By the third morning, the casino bosses were in a panic. They knew that the Japanese businessman was scheduled to leave, and they knew the odds were low of winning his money back. And sure enough, at 6:00 a.m., sharp, he steps into the first casino of the day, and starts playing the system at the highest level allowed him by the house. And he is still hot.

By a little after 11:00, he's been through five casinos, and is up additional tens of millions. Thus, the Japanese businessman (in a private limo - should have been his first clue that something was amiss) started for the airport, where he had instructed each of the casinos to meet him with a certified check made to his order for the funds he had won.

He never made it to the casino and his body was never recovered. Courtesy of the gang of Tony "The Ant" Spillotro, The Mob's local enforcer, the Japanese businessman disappeared into the Las Vegas traffic - vaporized in thin air as well as a direct hit by the kid geniuses' atomic bombs could have done. And of course, the certified checks never made it to the airport, either.

During the second and third days of the Japanese businessman's run, the casinos made movie-quality films of the Japanese businessman's play. Suspecting that the Japanese businessman had accomplices, the casinos each made note of several of the hallmarks of the Parity Hedge System (but they never really grasped the basics of the strategy).

So what of the kid geniuses? To say that they were scared to death is an understatement. Yes, they had nuclear weapons, but they weren't of much practical use. One of the kid geniuses knew Benny Binion, the rough and tumble founder of the legendary Binion's casinos. Whether or not the Japanese businessman visited Binion's is not known. Certainly, Binion - and the casino owners who weren't visited by the Japanese businessman - were as at risk to being tapped by future Parity Hedge System players as the casinos that had suffered the (now disappeared) losses.

What seems to have happened is that Benny Binion agreed, on behalf of the casino owners and doubtless The Mob, to have accepted a complete analysis and breakdown of the Parity Hedge System (and a promise not to use it anymore) in exchange for protection. Truth is, only Binion was smart enough to understand the importance of getting the breakdown on the Parity Hedge System, and was capable of bringing the casino owners and The Mob together to cut the deal. Instead of further broadcasting the existence of the system by bringing in people to analyze it (the only people who would have the mathematical training and intellect to understand it could also run the system, of course), Binion apparently just hid the system in his home vault along with the last remaining film canisters of the Japanese businessman's fateful three days.

The Parity Hedge System was apparently safe with Benny Binion through his death in the early 1990s, then it was inherited by Binion's son, Ted Binion. By this time, the Parity Hedge System and the Japanese businessman had been long forgotten, and the canisters relating to the Parity Hedge System had been moved out of Benny Binion's vault and into Ted Binion's closet. The Parity Hedge System itself was cached in the desert, along with some millions in silver that Ted Binion kept for emergencies.

At some point, Binion's new (former stripper) wife and her boyfriend were apparently rummaging through Binion's stuff and came across the film canisters. Watching the play, along with some narrative by a gaming analyst, they realized the important of the Parity Hedge System. Rumor has it that Ted Binion's stripper wife and her boyfriend then waylaid Binion and force-fed him heroin in an attempt to make him reveal the whereabouts of the analysis and summary done by the kid geniuses. But before the now-widow and her boyfriend could get to the spot in the desert, they were arrested for Ted Binion's murder.

So where is the Parity Hedge System now?

It is unknown where the analysis and the summary that the kid geniuses did for old man Binion have gone. What we do know is this: The group of mathematicians and physicists (probably numbering less than a half dozen) whom we have referred to as the "kid geniuses" knew about the system that they created. We also know there were a few people who worked for the casino's during the Japanese businessman's remarkable run that saw the system employed. There may have been other films made other than those that Benny Binion ended up with. And we have no idea what the Japanese businessman did to memorialize his rather amply-demonstrated knowledge of the complexities of the system.

Pages Describing the Parity Hedge System

The following pages detail the Parity Hedge System. Enjoy!

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Some Thoughts on the Parity Hedge System

For rather obvious reasons, we can't tell our readers who told us about the Parity Hedge System. For equally obvious reasons, we can't even admit that we know how the system works. But for the curious, here are some hints:

• The Parity Hedge System is a relatively "risk free" betting system. It will maximize good luck, and limit exposure to bad luck. It cannot overcome bad luck. You cannot have returns without risk - but you can manage that risk

• The Parity Hedge System is very similar to modern "Hedge Funds" (the real ones, such as Long Term Capital Management, not the ones that are simply disguised mutual funds), in the sense that it takes advantage of offsetting positions. The persons who really understand this system are derivative traders, as this system has a sort of "protective collar" or "protective spread" feel about it.

• Because the Parity Hedge System requires that you "Hedge" by protecting positions, it requires that you have a lot of cash available. In some situations, to try to win $30 you might have $600 on the table.

• The Parity Hedge System can be played both against the Casino and with the Casino, just like odds.

• If you don't have a very solid understanding of applied mathematics and statistical modeling, don't bother.

• You also should have a fundamentally solid understanding of the game of craps, the rules, and the lore. You must be able to calculate the correct paybacks in your head, and you must not be afraid of correcting the crew running the table. Even a 5% average screwup by them in calculating the correct payout and you have not chance of succeeding.

• If you want to find somebody playing the Parity Hedge System, go very early in the morning. The Parity Hedge System is complicated, so those that use it like to go at a little bit slower pace. They want to make sure the bets are properly placed and properly paid out - this is critical for a hedge/ arbitrage type system like this. So the people that use this system go very early in the mornings when there is basically nobody playing craps and they get the whole table to themselves. Also, look for somebody making a series of seemingly senseless offsetting bets.

casino survallance photo

A casino surveillance photo of a physicist employed at the Nevada Test Range suspected by The Sands casino of using the Parity Hedge System.

casino survallance photo

Surveillance photo of the Japanese businessman, taken at The Dunes on the morning of the third day. Notice the series of offsetting bets.

crime scene

circa. 1980. Las Vegas police investigate a shallow grave found in the desert believed to contain the remains of the Japanese businessman. The remains and the police file subsequently disappeared.

These images were sent to us anonymously, along with enough of a description of the Parity Hedge System that we could verify the sender's veracity.

Additional Pages on Craps

Introduction to Craps
What Craps is, how it is played, the mathematical odds, and more

Craps Strategies
Analysis of the basic craps strategies, and several popular strategies for betting.

Helpful Hints and Craps Crap
Some helpful hints and tips about playing craps, and some popular superstitions and rumors de-bunked.

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