By April Joyner and Sinéad Carew

NEW YORK (Reuters) – As U.S. stock prices have marched to record highs, futures contracts for Wall Street’s “fear gauge” show some investors are buying insurance against market turbulence that could erupt if surprise glitches hit the U.S. rollout of COVID-19 vaccines.

This hedging can be seen in futures on the Cboe Volatility Index expiring in March and beyond, which are trading well above the index’s current levels.

Uncertainty over the rollout has also helped keep the “fear gauge” hovering above its long-term average near 20, even as the S&P 500, Dow Jones Industrial Average, Nasdaq and small-cap Russell 2000 have rallied to record highs this week.

Investors said they would watch how close President Joe Biden can come to his goal of administering 100 million doses of the vaccine in the first 100 days of his term. On Thursday, he signed executive orders aimed at expanding testing and vaccinations.

“The next 100 days or so will be focused on the vaccine rollout and employment,” said Stacey Gilbert, portfolio manager for derivatives at Glenmede Investment Management. “If unsuccessful, that could potentially be negative for the market.”

Breakthroughs in COVID-19 vaccines and assumptions that life will return by summer to a semblance of normalcy have helped boost the S&P 500, now up more than 70% from its March lows.

There have been rallies in shares of banks, small caps and other companies that would benefit most from economic reopening.

The VIX in turn has drifted lower since March, when it surged to a record closing high of 82.69 after years of muted swings in U.S. stocks. Massive monetary and fiscal stimulus, along with optimism toward an economic recovery, have helped subdue the fear gauge.

Yet missed vaccination targets could bolster the case for investors looking to take profits, potentially ushering in more market swings. Fund managers in a recent BofA Global Research survey named potential problems with vaccine distribution as the market’s top “tail risk” – an event that could cause severe dislocations in asset prices.

“I don’t think we can put virus-related risks behind us,” said Emily Roland, co-chief investment strategist at John Hancock Investment Management. “There’s a lot of good news priced into markets this year.”

Some investors are seeking to take advantage of high volatility expectations while preparing for possible turbulence in the future.

Arnim Holzer, macro and correlation defense strategist at EAB Investment Group, is advising clients to sell February call options on the Barclays iPath Series B Short-Term Futures ETN, an exchange-traded note tied to the VIX, while buying March call options on the same ETN. VXX call options are often used to protect against a pickup in volatility.

For broad reopenings to take place this summer, vaccinations need to be completed for most priority groups by early in the second quarter and access to the general population established by the end of June, said Matthew Harrison, biotech analyst at Morgan Stanley.

“The vast majority of incoming questions has been around the pace of the rollout,” he said. “It’s clear that investors are trying to figure out what the impact is.”

Some 15.1 million people have received at least one dose of the COVID-19 vaccine in the United States – short of former President Donald Trump’s goal of vaccinating 20 million Americans by the end of 2020.

The total number of U.S. COVID-19 deaths has surpassed 400,000, according to the Centers for Disease Control and Prevention.

Brad McMillan, chief investment officer of Commonwealth Financial Network, is willing to be patient for now.

“It’s a rockier road than we thought but anybody really thinking about it knew it was going to be difficult,” he said. Still, he added, “if we don’t get vaccines really underway by the end of the month … markets might start to get concerned.”

(Reporting by April Joyner and Sinéad Carew; Additional reporting by Michael Erman and Caroline Humer; Editing by Ira Iosebashvili and David Gregorio)

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