It is a fact that spread betting is a risky trading activity. This keeps many investors away from this and when you add the ethical or moral beliefs associated with this trading activity, you have many more who are not willing to 'gamble' with their earnings. The fact however is that even when you do short term trading in the physical market, you are actually speculating or gambling to some extent. After all, you are expecting the movement of a particular stock or bond or commodity in which you have taken a long position to move up so that you can make some gains.
The only difference is that the quantity involved is normally much lesser and there is no leverage component. If you have the money to be able to spend on buying stocks in the physical market, then by all means you should do so and not bother about margined trading for short term gains. The fact is that many traders do not want to block their money or just do not have the capital to invest and are therefore compelled to take leveraged positions in the spread betting market in order to get the optimum benefit for their limited capital.
The popularity of margined trading has also increased over the years due to the costs that have been progressively coming down. Spreads have been decreasing due to competition and for a trader that means he can pay less and yet get the benefit of spread betting. With many spread betting brokers offering stable trading platforms that enable placing of stop losses, traders are finding it better to trade knowing that they can limit or restrict the losses.Spread betting has another advantage to offer. You can make handsome profits even in a falling market as long as your call on going short on a particular stock is a good one. When you have a portfolio and see that its value is getting eroded significantly due to a steep fall in the market, you can through margined trading hedge the losses by going short and recover the loss to a great extent without having to sell off your portfolio stocks. The fact that you cannot short sell in the physical market a stock that is not in your possession makes margined trading the best option to short sell in higher quantities and take advantage of a falling market.