Abstract
Researchers have shown that stock options contain more information than their underlying stocks. This information efficiency may reflect on firm value. For example, Roll, Schwartz, and Subrahmanyam (2009) argue that there is a positive relation between option trading activities and firm values. However, there might be some space for further analysis: call and put options may present different implications separately on firm values. Although Johnson and So (2012) indicate that call-put volume differences and future return skewness have a positive relation, they do not connect these results to firm values. We use call options/put options trading ratio (C/P) to measure whether firms with more call (put) options than put (call) options trading have higher (decreasing) firm values. Empirical results indicate that C/P ratio is positively and significantly correlated with Tobin's Q. Our results are valid after considering several robustness checks.
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