I found an answer to a similar question here: Top 10 values in dynamic options - #2 by devon.thomson
However I still don't get it. With "Dynamic Options" disabled, I can still type in the search field and the results are filtered out based on what I type. So, if this is working with "Dynamic Options" disabled, then what is the point of enabling it? I find to difference in behavior between the two modes.
I see that in order to achieve what I want I'd need to use the Parent option, so I guess there's not a good way as of today. In this case the options are orthogonal, instead of being a parent-child relationship.