The 20-year-old American enjoyed a dream Premier League debut in December, catching the eye as he helped Nuno's side come from behind to beat Chelsea 2-1 at Molineux.
Since then, he has mainly been an unused substitute and only featured once in 2021 – as a substitute at Brighton – but Nuno says he is still a big part of Wolves' plans as they 'know how talented he is'.
"It's going well. He's training every day," said Nuno on Otasowie, who also made his international debut for the United States in November.
"He had, some time ago, a problem that saw him miss some parts of training sessions for a period.
"But now, he's doing well and he's an option for us.
"We know how he talented is, while there are still things he has to improve.
"He's an option that we have and consider a lot. He can give good things to the team."
Otasowie grabbed an assist against the Blues before starting at Burnley, in a more striker-like role, and then coming off the bench against both Tottenham and Brighton.
On if he is a player Wolves are more so planning to use next season, Nuno added: "We don't look at things like that.
"We know what we are trying to improve on Owen and his game.
"We are focused on a daily process. We try, give, and try to find solutions, and look at the response of the player to certain decisions.
"We are counting on Owen and all the players in the squad, because we still have many games in front of us and we are going to need everybody."