Wolves are seeking a new manager after the dismissal of Vitor Pereira on Sunday. Defeat at Fulham on Saturday left Wolves winless and bottom of the Premier League table.
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Former Wolves manager O'Neil has been in talks with clubs chiefs about a return, says BBC Sport.
Indeed, much of the contract package for O'Neil had been settled before he chose to pull out of negotiations on Monday.
Under the terms of his 12-month severance package from when he was sacked last December, O'Neil is still being paid by the club.
Meanwhile, former Manchester United and Bayer Leverkusen coach Erik ten Hag is also currently in contact with Wolves.