The Stamford Bridge club have turned to Guus Hiddink following the sacking of Luiz Felipe Scolari this week and Lampard believes the turmoil caused by such an overhaul may allow Brendan Rodgers' side to pull off a shock.
He said: "It's a huge game for this football club.
"We are still in a relegation battle in the Championship so coming up against Chelsea means we can't really lose. I certainly can't, personally anyway, given my links with Chelsea.
"Brendan and I had a feeling it was going to be Chelsea funnily enough and that's how it worked out. It's turned into a massive game for them as well now and it might be a good time to play Chelsea."
With former Chelsea reserve team boss Rodgers at the helm, the Hornets are not short of inside information on their illustrious opponents, and Lampard has promised his new side will not be giving his son an easy ride - despite the England man's request.
Lampard said: "When the draw was made, Frank rang me within four or five minutes and we had a chat about it and he's quite happy about it.
"When he rang me, he said, 'Dad, make sure their midfield don't run with me, let me have a free run.'
"I can't repeat what I said to him as it won't go down too well but that is not going to happen.
"They're still a fantastic team. They might not be playing as well as they can but on their day they can take most teams apart anywhere in the world.
"It'll be a good test for our lads here at Watford. They are a good set of lads who work very hard and they are looking forward to putting themselves up for the test.
"As long as we give a good account of ourselves we'll be happy. And if we can pull off a shock and get a result, then even better."
Scolari was sacked earlier this week after only seven months in charge at Chelsea.
Lampard and Rodgers have only been in position at Watford for three months themselves but the former West Ham assistant admitted such a quick turnaround did not surprise him.
He said: "I've been in football a long time and nothing surprises me anymore. These things happen all the time. Football is a results business and if you're not getting the results then you know what will happen.
"But that is Chelsea's concern, not ours. We will be prepared for them and will give them a proper game."
, Draw 4/1
, Watford 10/1