Why not? If it was a different color, you'd ask why it is that color... It has to be some color... Besides, not all capes used for bullfighting are indeed red.

tradition and custom

I remember reading that cattle do not have monochromatic vision, as was once believed. I found some info on wikipedia (in the entry for cattle) that backs this up: "A common misconception about cattle (particularly bulls) is that they are enraged by the color red (something provocative is often said to be "like a red flag to a bull"). This is incorrect, as cattle are red-green color-blind. The myth arose from the use of red capes in the sport of bullfighting; in fact, two different capes are used. The capote is a large, flowing cape that is magenta and yellow. The more famous muleta is the smaller, red cape, used exclusively for the final, fatal segment of the fight. It is not the color of the cape that angers the bull, but rather the movement of the fabric that irritates the bull and incites it to charge. Although cattle cannot distinguish red from green, they do have two kinds of color receptors in the cone cells in their retinas. Thus they are dichromatic, the same as most other mammals (including dogs, cats, horses and up to ten percent of male humans). They are able to distinguish some colors, particularly blue from yellow, in the same way as most other mammals."