Knots in stems are formed due to
Bacterial infection of wounds
Injury caused by insects
Outgrowth of secondary tissues over wounds caused by falling of branches
Formation of callose plugs
Woody tissues respond to injury by forming a callus, which consists of a mass of undifferentiated cells arising from cell division near the wound surface. Over time, cork encroaches from the area surrounding the wound, and may completely cover it. This structure is called the knot. Hence, the correct answer is option 2.