Prior literature shows that implied volatility spreads between call and put options are positively related to future underlying stock returns. In this paper, however, we demon- strate that the volatility spreads are negatively related to future out-of-the-money call option returns. Using unique data on option volumes, we reconcile the two pieces of evidence by showing that option demand by sophisticated, firm investors drives the posi- tive stock return predictability based on volatility spreads, while demand by less sophis- ticated, customer investors drives the negative call option return predictability. Overall, our evidence suggests that volatility spreads contain information about both firm funda- mentals and option mispricing.