Hey Friend,
B diminished is the second naturally occurring chord in the key of A minor. If you remember, the major keys have a diminished chord as their seventh triad, so we saw this in the key of C major (the relative major to the key of A minor).
B diminished uses the notes B, D and F from the A minor scale:
A B C D E F G (pretty straightforward, huh?)
Being the second chord in the series, you see that if we start with the B note, we're just skip over the C and E notes to get the end result.
Diminished chords are not constructed from the typical 1 3 5 note combination, but they use the 1 3m 5b (first, minor third and flat fifth) notes from the key the chord is named after. Since this is a B chord, we use a B major scale:
1 2 3 4 5 6 7 8
B C# D# E F# G# A# (B)
Make the third note minor (lower it a half step or one fret), so that becomes D. The F# is the fifth note, and it gets lowered a half step to become F. That gives you B D F, or B°!
So just to clarify, you build the chord from the key it takes its name, but the same chord works in other keys because its notes occur naturally in those other keys. B° works in A minor because the A minor scale has the notes B, D and F in it.
Here are the exercises for you to play with:
Here are the various positions up the neck where you can play B°.
And its barre chords:
My wife is already ramping up for the weekend remodeling fun, so I'm getting churned up in the wake. I can see the end of the tunnel, though, so we might actually have a usable bathroom within a week...
Have yourself a great Friday Eve!
Peace~
Dave | 
