Why most of the common investors stay back when it comes to derivatives?

I think it is too early to consider about an undeveloped derivative market. The lack of knowledge is a prominent factor in the case of common retail investors. Derivatives are complex products and most of the time beyond the scope of comprehension of ignorant investors. The point put forward by Mathew sir is worth considering and use of derivatives for hedging will offer more flexibility.

 I don’t support the idea of small investors employing derivatives for speculation, at least becoming option writers. The main reason we haven’t faced any serious problems with regulation of derivatives is not because of the efficiency of our regulatory system, rather the market being in the nascent stage there were little possibilities. Many small traders, who tried option writing during 2008, are yet to undo the damage. A strong regulatory framework and proper knowledge are vital.

I don't think it is because it is too difficult to understand, may be because money which one has to shelve out for each investment is too high. Suppose if you own 100 shares to hedge this you will need to sell only close to 100 options, but the regulators mandates you to buy from 500 for some shares up to 3000 depending on the price of the stock, which may not be affordable to many small investors. IF THEY ALLOWED IN BLOCKS OF 100 THEN SMALL INVESTORS WILL WALK IN TO INVEST.

Moreover buying or writing naked options when the mandated quantity of options is high, makes the investment much riskier especially when trading naked buys and sells. You can read Malcolm Gladwells, "What the dog saw" to know how these naked options can bankrupt even knowledgable and big time option traders.