Lopez spent last season on loan at Tottenham and should have signed on a permanent basis at the end of the term but the deal collapsed as Spurs haggled over the fee.
Lopez is back with Espanyol and is enjoying some regular first-team football for once as Diego Lopez is currently out injured, but his future still remains up in the air.
The goalkeeper's contract runs out at the end of the season, but so far there is no sign of him penning a new one, and a move away could be on the cards.
Reports in Spain claim that Lopez has told his agent to negotiate a new deal with Espanyol first and foremost, but if that cannot be done then he has to find him a new club.
Watford are said to be monitoring developments but will face competition from Brighton, who were interested in the summer and are sure to make another move if he becomes available.