The defender has played 21 times across all competitions since joining on loan in summer from the Spanish outfit, and has impressed enough to earn himself a permanent move.
The 24-year-old was signed by Atletico from Celta Vigo last summer before he was loaned out immediately to the Premier League side.
The £18million Wolves will pay should both parties reach an agreement will equal the fee they paid Middlesbrough to secure the services of winger Adama Traore in July, and Spanish football expert Guillem Balague has broken down what has made the move possible.