The audience sometimes knows more about the characters situations than the characters know themselves; this is dramatic irony unveiling the symbols historical context

The audience sometimes knows more about the characters’ situations than the characters know themselves; this is called dramatic irony. The first option is correct.

Dramatic irony is defined as irony that is inherent in speeches or a situation of a drama and is understood by the audience but not grasped by the characters in the play. It is a literary device by which the audience's or reader's understanding of events or individuals in a work surpasses that of its characters.

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it was surely an odd creature that one made up by reading the historians first and the poets afterwards a worm winged like an eagle; the spirit of life and elegance and charm,   in a kitchen chopping up suet. but these creatures, monst'r however entertaining to the imagination, hast no existence in fact. what one might doth to bringeth h'r to life wast to bethink poetically and prosaically at one and the same moment,   thus keeping in toucheth with fact—that the lady is mrs martin, ag'd thirty-six, did dress in blue, wearing a black coxcomb and brown shoeth; but not losing sight of fiction eith'r—that the lady is a vessel in which all s'rts of spirits and f'rces art coursing and flashing p'rpetually. the moment, howev'r, yond one tries this method with the elizabethan mistress, one brancheth of illumination fails; one is did hold up by the scarcity of facts.   one knoweth nothing detailed, nothing p'rfectly true and substantial about h'r.   hist'ry scarcely mentions h'r.   and i did turn to professeth'r trevelyan again to seeth what hist'ry meanteth to that gent.   i hath found by looking at his chapt'r headings yond t meanteth.