Did you see the arm length? Any other color changes while you were watching? The webbing and coloring look very much like the Caribbean octopus, briareus but briareus is nocturnal and has very long arms proportionate to the mantle and the eyes are set up higher and more stalk like (see my avitar). The eyes may flatten out for disguise but they look more hummelincki set in the photo (too much webbing for hummelincki though)
What time of day was the dive? The distinct arm stripping has me puzzled but the rest of the animal could easily be briareus. Look through the journals with briareus in the titles to see if the animal looks similar to what you remember. Beautiful is likely the most often adjective used to describe this particular species.
I thought about the macropus complex too with the arm pattern. There is one in Norton that seems to be common called a scribbled night Octopus (O.graptus)that seems to show a very similar body pattern and is not as red as the others. Looking at the map something commonly Australian might be a good bet.
Somewhere along the line I swear I saw a distribution map for briareus that showed them globally but now all I find is western hemisphere habitats listed so I either misread the distribution map or it came to me in a dream
The funny thing is: I didn't find any other encounter thread, so I put it at the diving encounter thread. We saw the ocotpus at the beach! Look at the second photo, do you see the sun reflecting directly above the octopus head? He was extremely close to the beach, to be honest, he couldn't be closer, his head would have got out of the water! Also, he wasn't afraid of us at all. I put my feet in the water and he wanted to touch them, but I got out of the water! *afraid*
You might enjoy our only in situ journal of an octopus, especially the last encounter before Situ went off to lay eggs. I did notice that the water was very shallow and most of our members that have caught their own pets (only a couple have done this though) find them in only a few feet of water during low tide.