Hmm, actually, your mileage will vary. I vaguely recall that in case of a trading halt for an index option the SQ for settlement will be from after the resumption of trading. It's possible that in case of a trading halt, the owner of the stock/ETF option has a right to exercise the option at the usual time. In both cases you, the short, will be very screwed.
FSU has it here: https://www.elitetrader.com/et/threads/what-happens-to-options-if-they-shut-the-markets.341974/
How about in this scenario: Index has a 20% circuit breaker Index is made up of sum of constituents A and B At time T-0 A = 100, B = 200, Index = 300 You sell the same day expiration 235 P for $5 ( Just outside the 20% circuit breaker) At time T-1 A = 70, B = 140, Index = 240 (Index has hit circuit breaker) Fair value of index based on constituents is 210. I think in this scenario buyer of the option would exercise and lock in the gain by buying stock in A and B.
Doesn't the entire market stop trading when the circuit breaker is hit? How could they lock in the gain?