You often hear players say, "I was under ICM pressure." Risk Premium is a measure of ICM pressure. It is one of the most important concept to understand in tournament poker. Risk Premium quantifies how much more equity you need than the pots odds you are being offered to call an all-in because of ICM pressure.
If you need 50% equity to call an all-in in a ChipEV scenario, and your Risk Premium is 12% on the bubble, then you would need 62% equity. You simply work out the pot odds, then add the Risk Premium.
Calculating Risk Premium
If you are familiar with my book Endgame Poker Strategy: The ICM Book, you’ll know we used Bubble Factor as the guiding principle for endgame decisions. As the years passed we recognised that Risk Premium was a much simpler concept to internalize and apply in game. It is much easier to digest an amount you add to your pot odds than do Bubble Factor calculations.
However, if you are a Bubble Factor fan, don’t worry. Bubble Factor and Risk Premium measure the exact same thing, they are just different calculations to show ICM pressure. Bubble Factor and Risk Premium measure the exact same thing, they are just different calculations to show ICM pressure. If you know one, you can calculate the other using this formula:
RP = ((BF/BF+1)*100)-50 where RP is Risk Premium and BF is Bubble Factor.
For example if Bubble factor is 2, then risk premium is:
- RP = ((⅔) *100)-50
- Which equals 16.67
Risk Premium guides all ICM decisions, not just calling an all-in. If you have a Risk Premium of 16.67% you have to call shoves much tighter, but it also means that, for example, your opening range needs to be tighter. If you opened a ChipEV range with that Risk Premium, your opponents could shove on you, knowing you would have to fold a lot of your range. You will see throughout this book that Risk Premium impacts every strategic decision when ICM pressure is significant.
Risk Premium is influenced by four things:
- Payout structure
- Chip stacks
- Stage of the tournament
- Field size
Broadly speaking, the steeper the payout structure, the lower the Risk Premium. You are more incentivised to play for the win and optimal strategy is closer to ChipEV. Flat payout structures have high Risk Premiums, because the earlier payouts are worth more, there is more reason to ladder and less incentive to play for the win.
Using Risk Premium
All of the chips in play influence Risk Premium. If you have a big stack, your Risk Premium is generally quite low, because you do not risk elimination. If you have a short stack your Risk Premium is also often low, because you need to play aggressively to progress, except on money bubbles where it is very high (as there is so much value in just cashing when you are short and less value in doubling). Medium stacks often have high Risk Premiums because they lose the most, relatively, when they risk elimination.
Risk Premium is a relative metric. You have a Risk Premium against an opponent and they have one against you. A medium stack has a low Risk Premium against a short stack, because they cannot be eliminated. That same medium stack has a very high Risk Premium against a big stack, because they risk elimination and sacrificing a lot of equity.
Chip stacks not involved in the hand influence Risk Premium. A micro stack at a final table, for example, greatly influences how two players should play. They increase everyone else’s Risk Premiums, because busting out just before the micro stack busts is a disaster. Likewise, big stacks influence Risk Premium. When somebody has a huge stack often the other players are playing for second and laddering becomes a bigger priority.
Although it is part of payout structure, it’s useful to think of the stage of the tournament as the third thing to influence Risk Premium. At the very start of a tournament, Risk Premium is very low, almost identical to ChipEV. We are nowhere near the money and should be playing to accumulate chips. On the money bubble Risk Premium is very high; it would be a huge mistake to call off with a modest hand when folding would have guaranteed you a cash prize.
Finally, although it is the factor that has the lowest impact, the number of runners in a tournament also affects risk premium. This may seem strange, but the easiest way to understand it is that the more runners there are, the more people are paid, and the more devastating it is to bubble. If a tournament has 1000 runners and pays 150 places and you have a short stack with 151 left, getting into the money is a big win, and doubling up doesn’t greatly increase your chances of winning the tournament. On the other hand, if a tournament has only 60 runners and pays 9 places and you are shortest with half the average when there are 10 left, you’d still prefer not to bubble, but your risk premium isn’t as high because:
- As the shortest stack you’re very likely to bubble if you keep folding, much more so than when there are 151 runners left (several of whom will also be short stacked, and it’s more likely bigger stacks will collide).
- Doubling is more valuable with only ten players left: it increases your chances of coming first by 5% (from 5% to 10%) and has almost as big an effect on your chances of coming second and third.
The more runners there are, the higher the risk premiums are on the money bubble. In the WSOP Main Event where 1,500 runners are paid, they’re pretty astronomical.
If you want to learn more about ICM and risk premiums, I recommend:
- My book: Endgame Poker Strategy: The ICM Book
- My course: "Postflop ICM Simplified" Use the coupon code POKERORG for a 10% discount.
While you're there, check out our other courses on mystery bounties, exploiting soft live fields, target stack satellites, and our signature course "Tournament Poker Study Simplified."
Dara O’Kearney is an author of seven best-selling poker books, pro, coach, commentator, and the co-host of the GPI award-winning podcast The Chip Race. Dara is sponsored by WPTGlobal (Code: CHIPRACE) and has his own training site, SimplifyPoker.com. Follow Dara on X.
