Cost of diligence. One can theoretically fully diligence an option and its underlying stock’s issuer with public information. One cannot do that in private investments. Private investing requires expensive legal work; it also requires the ability to enforce one’s rights in court. Investing $10 or 20k pretty much guarantees one isn’t doing the former and can’t do the latter; that’s a recipe for disaster.
As a former options market maker who is now in private equity, I (a) agree that options should be more roped off from retail investors and (b) minimally dabble in private equity and don’t touch options in my PA.
The only responsible buyers of options buy them expecting to lose money. They’re the lossy leg of the trade, the insurance. When hedge funds want to go long or short they use cash positions or leveraged swaps. Not options.