The traditional theory is that 'vargr' originally was a
synonym for 'ulfr' and later aquired new connotations
such as "outlaw". (The outlaw is like a wolf.)
More recently it has been proposed that the original meaning
of 'vargr' is "criminal" and that "wolf" is a later figurative
meaning. (The wolf is like an outlaw.)
It turns out that the second theory is, if anything, more
consistent with what is preserved from the various Germanic
languages.
The traditional zero-hypothesis is that the meaning of words
moves from concrete (a specific type of animal) to more abstract
(a man out of accordance with the community) and especially that
primitive societies had (have) a very concrete vocabulary.
I have not researched the matter sufficiently to have an
independent opinion.