I believe you can have one but not both. email  notification on change
of ownership requires that both the new owner and the old owner can see
the item  for the notification to kick off. If you set advanced
permissions to users can only "Read their own" then either the old owner
or the new owner won't be able to see the item when membership changes.
Depending on when the email is kicked off, probably after the change,
then one or the other can't be informed because they can't see the item
anymore.