Additionally after all species have been inserted, a ´Local optimization´ takes place. This optimization operates on all branches to subtrees containing marked species and does not stop at folded groups - regardless which settings are selected in ´Tree optimization´.
That local optimization will not avoid the need for global tree optimization (see ´Global Optimization´).
Using this function for a bigger number of species (or repeatedly using it), will cause your tree to degenerate (see section 'Tree degeneration' in ´Add species without optimizing topology´ for more information. What is said there also applies here, the effects are just less worse here).