TikTok Influence on Affect Option Prices: Attention Dynamics and Asset Valuation

The rise of social media platforms has fundamentally changed how investors gather information and make decisions. Traditional financial theories, such as the Efficient Market Hypothesis (EMH) and the Black Scholes option pricing model, assume that investors are rational and that asset prices reflect all available information quickly and accurately. However, recent market dynamics have revealed that the attention garnered through social media can exert a substantial influence on asset prices, particularly option prices. This article examines how social media attention, exemplified by TikTok, impacts option pricing. It integrates basic financial theory with behavioral finance concepts to analyze real-world cases like GameStop, AMC, Tesla, and Xiaopeng Motors. The study investigates changes in option trading volume, implied volatility (IV), and prices during spikes in social media popularity, using indirect indicators such as online search trends, number of posts, and short video views. Results indicate that sudden internet popularity can significantly increase a stock's option price and implied volatility even without new company information. This is often triggered by emotionally driven retail investors, rather than rational judgments based on company fundamentals. Additionally, high transaction costs and rapid market changes hinder arbitrage mechanisms that could have corrected price deviations. In conclusion, social media attention is emerging as a key variable influencing option market pricing.