Backspreads, Diagonals and Butterflies - Advanced Strategies
4.3 (43 ratings)
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Backspreads, Diagonals and Butterflies - Advanced Strategies

This course combines 3 advanced spreads - Backspreads, Diagonals (and Double diagonals), and Butterfly spreads.
4.3 (43 ratings)
Instead of using a simple lifetime average, Udemy calculates a course's star rating by considering a number of different factors such as the number of ratings, the age of ratings, and the likelihood of fraudulent ratings.
763 students enrolled
Created by Hari Swaminathan
Last updated 3/2013
Curiosity Sale
Current price: $10 Original price: $60 Discount: 83% off
30-Day Money-Back Guarantee
  • 2 hours on-demand video
  • Full lifetime access
  • Access on mobile and TV
  • Certificate of Completion
What Will I Learn?
  • Learn about three advanced strategies - Backspreads, Diagonals and Butterfly spreads
  • Learn how the Backspread can be constructed in very creative ways
  • Why the Backspread can be a monthly income strategy and a Volatility strategy at the same time
  • What are the differences between a Calendar spread and a Diagonal
  • Why the Diagonal spread is considered an exotic strategy
  • Learn about the very exciting Butterfly spread
  • What are the best times to trade a Butterfly spread
  • What are the specific applications of a Butterfly spread that can make it a very powerful weapon in your arsenal, especially if you have losing trades
View Curriculum
  • Options basics, Call and Puts and Vertical spreads
  • Options adjustments and Spread adjustments
  • Calendar spreads (for Diagonals)
  • Credit spreads (for Butterfly spreads)


Back Spread and Ratio Spreads involve putting on an unbalanced amount of Long and Short Options. If we have more Long Options than Short, the position is called a Back Spread and if we have more Short Options than Long, the position is called a Ratio Spread. In a Ratio spread, you have unlimited losses on one side because you have more Short Options. The Back Spread is part of the BUSY PROFESSIONAL SERIES can be constructed in many creative ways, and we show you how you can manage different strike prices as well as different ratios of Long and Short Options to construct an optimal Back Option Spreads. We don't recommend Ratio spreads as they have an unlimited loss potential.

What you will master
  • What is the philosophy of Back spreads and Ratio spreads
  • Different creative possibilities with the Back spread
  • How should we look at the Greeks in a Back Spread
  • Importance of understanding the "Valley of death"
  • How should we avoid the valley of death
  • Why is this a Volatility strategy
  • Why do we not recommend a Ratio spread
  • Why is the back Spread a great trade for the busy professional


The Diagonal is a variation of the Calendar time spread, and it tends to reduce the Vega exposure of a Calendar spread. Due to this fact, it also has a Delta bias when the trade is put on. It is important that you understand and become a master at trading Calendar spreads before you try a Diagonal spread. Although the Diagonal has very similar characteristics as a Calendar spread, the Diagonal is a complex variation of the Calendar spread. Just like in Calendars, the easiest adjustment to a Diagonal spread is to convert it into a Double Diagonal on the losing side, and the course covers this adjustment in detail. You will also benefit from a higher Theta decay than in regular Calendars, however the compromise you make is that the risk exposure in higher than a Calendar, and you also have a Delta bias.

What you will master
  • What are Diagonals and how do they differ from Calendars
  • Why are they difficult to adjust
  • What are the normal adjustments for a Diagonal
  • How the double diagonal increases your profit zone and your max profit area
  • Why does Diagonals have better Theta decay than Calendars
  • Why do Diagonals reduce the impact of Vega
  • Why is there a higher risk in Diagonals than Calendars


The Butterfly is a low risk, high reward, and low probability strategy. The Butterfly involves 3 different Options including Long and Short options, so it can be a bit difficult to manage once its put on. But the Butterfly can produce great results if it works, and in many cases the cost of the Butterfly is minimal, and if you're lucky, you may even receive a credit for the Butterfly. Both these trades are generally put on by hardcore Options traders. The Butterfly trade should not be your regular "bread and butter" trade in the sense that you can't rinse and repeat this strategy all the time for consistent monthly income. But the Butterfly can be an excellent strategy in very specific circumstances - like protecting the losing side of an Iron condor or a credit spread. Another great application for the Butterfly is during an earnings report. Both of these specific applications are covered in detail in this course of Advanced Options Strategies.

What you will master
  • Why is the Butterfly a low risk, high reward strategy
  • What is the probability of the Butterfly producing fantastic results
  • How do we adjust Butterflies
  • Why the Butterfly is a speculative strategy
  • Why is the Butterfly not a "bread and butter" trade
  • What are the specific instances where a Butterfly can work
  • When does the Butterfly generate its maximum profits
  • How can use Butterfly trades as a hedge to protect our monthly income strategies
Who is the target audience?
  • Options traders with all the basic knowledge and want to expand their knowledge of more advanced strategies
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Curriculum For This Course
10 Lectures
3 Lectures 40:19
The Backspread is a "Volatility" strategy and can benefit from a move in either direction. We explain the base case of the Backspread
Preview 08:32

The strength of the Backspread lies in its ability to be creative and flexible with a number of features - selection of the Long / Short ratio, selection of strike prices and moneyness of the Options, as well as expiry series. In this lecture, the Backspread is dissected in detail for all these variations.
Preview 20:20

The Ratio spread is the reverse of the Backspread. The Ratio spread has more Short Options than Long Options, and so will have an unlimited loss profile on one side. Due to this fact, the applications for a Ratio spread are limited and they have high risk for low reward.
Discussion of the RATIO SPREADS strategy
3 Lectures 37:07
Explanation of the base case of a Diagonal spread
Discussion on the Diagonal spread

How is the Diagonal similar to and different from a Calendar spread ? This lecture breaks down the Diagonal spread in detail.
Demonstration of the Diagonal trade

Another demonstration of the Diagonal spread
Demonstration of the Diagonal spread using Chipotle Mexican Grill (CMG)
4 Lectures 29:54
Introduction of the Butterfly spread and its construction
Discussion of the Butterfly spread

Demonstration of the Butterfly spread using the S&P 500 Index (SPX) Options
Demonstration of the Butterfly spread

The Butterfly spread can be very effective in specific situations. We explain these situations in detail, including how to hedge other positions using the Butterfly spread
Specific application of a Butterfly

A wrap-up of all the three advanced spreads

Course Quiz
7 questions
About the Instructor
Hari Swaminathan
4.4 Average rating
3,645 Reviews
29,506 Students
29 Courses
Options Mentor, Financial markets educator, Trader, Investor

Knowledge. Strategy. Execution.

Hari Swaminathan is the founder of OptionTiger, a cutting-edge Options Mentoring company, and a full-circle educator in all areas of Financial Markets, Hari has developed several proprietary Intellectual Property "methods and approaches" around enhancing base case Options strategies (which favor the Market Makers) and turns that deficit into a massive EDGE on the trader's side.. Like building a powerful Strategy "for all Option Strategies". 

Hari is self-taught in Options and actively trading these instruments for almost 10 years, mostly through trial and error. Trial and error in general, is an excellent method of learning, but applied in this context, trial and error CAN BE EXPENSIVE. My courseware focuses on this aspect mostly, so you can avoid losing money in the 1 to 2 years when you're learning. Yes, it does take that long, if not more. If the markets were indeed simple, you'd have everyone involved in it. Patience, Diligence, and Determination are what you need during this time.

Hari has a Bachelors degree in Engineering from India, and MBA's from Columbia University in NYC and London Business School in London UK. 

More than ever, its become important for normal people to take charge of their financial situation, and truly understand how financial markets, and the various asset classes, trading nuances really work. Investing in the financial markets is no longer a HANDS-OFF ACTIVITY. There's no point blaming financial advisors after the fact. Now, it's become crucial for everyone to do "their OWN homework", so you can decide for yourself whether something is good or risky. This is of course easier said than done, and that's exactly where we come in.

My mission is to educate everyday people on the deep, strategic underpinnings of the stock markets, and exploit that knowledge with the use of OPTIONS.  THERE IS NOTHING RANDOM about the markets. There are surprises all the time, but there's always a method behind every madness. And my goal is to get you to this point of understanding and awareness. That's when it starts to fit in. 

Knowledge, Education, Crafting Breakthrough strategy, Technical analysis, Following Smart Money, Risk management, Disciplined Money management, and near flawless Execution approaches are just a few of the crucial points emphasized in all the Courses. Video-based education courseware, Practical workshops, several elite proprietary Advanced systems, a 4-week Live Mentoring program are just a few things we offer. The goal is to provide a "full circle" education in the Markets, which is necessary before it starts "fitting in". 

Let's break down the Options game in a realistic manner. 

The Pluses

1. Options were invented out of thin air. And the people who invented them won Nobel Prizes for their invention (Fisher and Black). It is purely a "Mathematical" concept. 

2. This gives rise to very complex but interesting  analytical scenarios. It also gives us the ability to model Options with a set of tools like a car dashboard. This data is embedded in the mathematical formulas that underpin Options structure itself.

3. Because everything in Options is defined in mathematical terms, its also important to realize that OPTIONS will always be the same. Forever. Unless they discover serious flaws in the formulas and models used by these Nobel winners. 

4. Options and Chess have LARGE overlaps. You may agree that Chess is a game of "skill". It's a game of Strategy and depends upon how well you can plan (ahead) to attack, defend or take a neutral position. We also believe that Chess is strategy-focused and depends upon certain mathematical principles. Why or How do we know this - The reason we know its a game of skill is : Try to play 100 chess games with Kasparov or Anand. Normal people are almost guaranteed a loss in all 100 games. So it has to be a game of skill. And why do we know its underlying features are mathematics based. The fact that a computer like Deep Blue beat the GrandMaster Garry Kasparov in 1997.

5. Lastly, You MUST believe this completely -  Options, just like Chess, are a "skill set", and requires acquiring a deep set of analytical skills much more so than most skill sets in the world, and THEY can only be MASTERED over a period of time. Once you understand Options better, you'll realize how true this is. But, there is a very powerful light at the end of this tunnel. You build a skill set for life.  Age, Geographical location, Lifestyles, or Weather are no longer a barrier to creating consistent income streams, regardless of who you are, where you are, or how old you are. 

This is very POWERFUL stuff. 

Now let's look at the negatives. This is what most people will NOT tell you. Anyone that tells you Options are SIMPLE, and you can make extra ordinary income easily, is JUST NOT TRUE. I will tell you Options can be brutal if you simply apply speculative methodologies. And once you can develop a SYSTEMATIC approach to every situation (which is the Real Game), you'll be well on your way to consistent performance.


Options are easily the most fascinating financial instrument with several upside benefits, but also an equally powerful set of negatives. 

1. Options have a steep learning curve. Don't expect to become Kasparov in a couple of months. Market Makers who are 99% of the time, the counter party to all Options trades, are Options professionals, with 10 to 20 years of experience, in performing their "legal duty" of providing liquidity. 

2. If you're interested in Options, try NOT approach it with a mindset or requirement of making money. This is not only NOT going to happen, but its a recipe for disaster. It's like a student of Medicine wanting to practice their skills after 2 months of study. 

3) As someone that has self-learnt Options and through making mistakes from Trial and Error, I can tell you Options trading is not something you should take lightly. You will hear people talking of fantastic triple and quadruple digit returns. I'm here to be brutally honest with you - 

- Be very very careful in the first 12 months of Options trading. 

- This is when everyone is the most vulnerable to losing money. 

- Your main objective during this time is to focus on learning this craft 

Having said that, if you can get past the first 12 months and acquire the expertise in a Systematic manner with Systematic approaches to every situation, true financial independence awaits. But you have some serious but exciting work to do before you get there, and I'm here to help you in this journey. 

And join me in my UDemy courses, where I share cutting-edge theoretical knowledge mixed with practical insights, strategy and impeccable execution approaches, through live trading examples. How do we know it's all this (don't just go by my word). Check what 30,000 students have to say in 3100 Reviews, with almost 2800 of them being 5-Star or 4-Star

If you have any questions at any time, please feel free to message me on Udemy.

The order to follow on my Udemy courses

Comprehensive guide to Financial Markets, Investing and Trading

Options Trading Beginners Bundle (3-course Bundle)

Advanced Options Concepts

Options spreads and credit spreads Bundle

Technical analysis and Chart reading Bundle

After this, the order does not matter. You can take any of the courses as per your interest.