What is the alternative? And is it really better than encoding into the data type?

Only option I can think of is writing unit tests for each case, which doesn't seem like too much different.

And without type encoding you never sure that invariant always hold. You can always manipulate any options in any part of the program. Then after any modification you have to perform a "sanity check" if options are in a well defined state or not. I don't see how this is better than encoding the invariant into the types.