- You have an inner value and the inner value is something non-null (an integer, a string, another optional, etc.)
- You have an inner value and the inner value is null
- You do not have an inner value
The problem, from what I understand, is that Option[T] in Python is equivalent to the union type T | None, and union types are flattened (e.g., (T | U) | V is equivalent to T | U | V) and duplicates are ignored (e.g., T | U | T is equivalent to T | U). As a result, Option[Option[T]] is equivalent to (T | None) | None, which is equivalent to T | None | None, which is finally equivalent to T | None, which means you lose the distinction between "No inner value" and "Inner value is present but is None".
As a more concrete (albeit somewhat contrived) example, say there's some API you can query for the owner of a particular document ID where the document ID may or may not refer to an actual document (e.g., maybe you got it from a cache and the document has since been deleted). One way to express this would be (using Rust syntax)
fn get_owner(id: DocumentId) -> Option<Option<UserId>> { ... }
So if you get None, the document does not exist; if you get Some(None), the document exists but it has no owner; and if you get Some(<id>) the document exists and it has an owner.(This can probably be done better by creating new enums, but it's an example so give me a bit of slack)
A naive port of this signature to Python would be
def get_owner(id: DocumentId) -> Option[Option[UserId]]: pass
But to type checkers this is equivalent to def get_owner(id: DocumentId) -> UserId | None: pass
So now you're in the pickle the OP describes: you can end up with a None, but you no longer knonw whether it means "no document" or "no owner". The Python solution is to basically create a different name for either the outer None (e.g., MISSING as in the OP) or the inner one (e.g., NO_OWNER or the like).