In addition to the flurry of activity in the individual banks Wednesday, as well as the heavy trading in the SPDR Financials (XLF) lately, the PHLX Bank Sector Index (.BKX) is now seeing higher volume. BKX is up .36 to 35.02, but off 1.3 percent from session highs of 35.52. Meanwhile. options volume in the index is 12,000 calls and zero puts. The bulk of the volume is due to one spead trade, in which 6,000 Jan 41 calls were apparently bought on the bank index for 65 cents while 6,000 Jan 42 calls sold for 45 cents. The Jan 41 – 42 call spread, for a net debit of 20 cents, appears to be a new position targeting a move to 42 or more in the index through Jan 2012, which represents a 20 percent rally over the next 8 weeks. After rallying nearly 30 percent off the 52-week lows seen intra-day on Oct 4, the rally in the bank index stalled on October 27 and BKX is down 17.3 percent since that time. Through Wednesday, the index had retraced 87.1 percent of the 8.32-point gain recorded from Oct 3 to Oct 27. The recent options flow in some of the banks and the bank index seems to reflect some expectaions for another run higher in the sector in the weeks ahead.