Bookies were alerted when a number of non-gamblers suddenly opened accounts specifically to back Hoddle for the vacancy.
The 49-year-old has previously worked under chairman Ken Bates at Stamford Bridge and Ladbrokes spokesman Nick Weinberg said today: "Hoddle is the latest manager with Chelsea connections to be well backed for the post following gambles on Dennis Wise and Claudio Ranieri.
"Until late Monday Brian Kerr had been the target of the most significant gamble to date. But punters started to come for Hoddle in increasing numbers. And they picked up from where they left off yesterday, prompting his price to fall away."
Ladbrokes have been forced to cut Hoddle to 2/1 from 7/1 in a market which has both Kerr and caretaker manager John Carver at 11/4, Ruud Gullit 6/1 and Alan Curbishley 7/1.
Hoddle is even hotter at 7/4 with William Hill's, whose spokesman Graham Sharpe said: "It's the number of new account holders specifically tailoring their bets to Hoddle which has put the cat among the pigeons."
Harrogate-based Sky Bet also have Hoddle 2/1 favourite but report a rush of money for Curbishley despite the former Charlton boss's claims that he has not been offered the role and have cut him from 6/1 to 7/2.
Sky Bet's Dale Tempest said: "Curbishley has become the new Martin O'Neill, as any job that becomes available seems to be his if he wants it."
Hoddle quit Wolves in July, stating that he felt the club's ambition failed to match his own after they announced stringent financial cutbacks.