The 24-year-old Spanish wing-back is set to move to Molineux on a permanent deal in the coming days.
He had signed from Atletico Madrid on loan for the season but Wolves, impressed with Otto's performances, have moved to snap him up this month.
It's thought all parties are open to the move and it should be completed before the window closes.
Otto, who only joined Atletico in the summer from Celta Vigo, has made 21 appearances for Nuno Espirito Santo's team, scoring once in the 2-0 win over Southampton.
He made his debut for Spain in October against England and has earned three caps.
Nuno said today that he wants the player to ignore any transfer business and concentration on his football.
"We're very pleased and happy with him, he also is happy to be here," Nuno said. "He's working hard and staying focused
"Myself and Jonny, we only have to be focused on what's happening in the pitch, we don't get distracted by anything or anyone.
"He's very happy here, he has his family here, so everything is OK, but nothing has changed.
"During this period, there is so much speculation and rumour, you have to be focused and not distract yourself on what's happening outside."
The club record was set last summer when Wolves paid £18m for Adama Traore from Middlesbrough.