The correct answer is $\boxed{\frac{1}{27}}$.
The probability of event A happening, given that event B has already happened, is called the conditional probability of A given B, and is denoted by $P(A|B)$. It can be calculated using the following formula:
$$P(A|B) = \frac{P(A \cap B)}{P(B)}$$
In this case, event A is “all three balls are red” and event B is “the first ball is red”. We are asked to find the probability of event A given event B.
The probability of event A happening is the number of ways to choose 3 red balls out of 12 balls divided by the total number of ways to choose 3 balls out of 12 balls, which is $\frac{4 \times 3 \times 2}{12 \times 11 \times 10} = \frac{1}{27}$.
The probability of event B happening is the number of ways to choose 1 red ball out of 4 red balls divided by the total number of ways to choose 1 ball out of 12 balls, which is $\frac{4}{12} = \frac{1}{3}$.
Therefore, the probability of event A given event B is $\frac{\frac{1}{27}}{\frac{1}{3}} = \boxed{\frac{1}{27}}$.
Option A is incorrect because it is the probability of event A happening without considering event B.
Option B is incorrect because it is the probability of event B happening without considering event A.
Option C is incorrect because it is the probability of event A and event B happening together.