Feb 29 (Reuters) - Hamas is preparing for a possible Israeli offensive in the Gaza Strip against Palestinian militants carrying out cross-border rocket attacks.

Here are some of the options it has faced since seizing control of Gaza in June:

TRUCE

Hamas has signalled its willingness to reach a ceasefire with Israel that would end rocket launches by Hamas and other militant organisations. In return, Hamas wants Israel to cease all military strikes in the Gaza Strip and occupied West Bank. It also demands Israel lift a two-year-old blockade of Gaza that has deepened hardship among the territory's 1.5 million people.

Calm in the Gaza Strip and an improvement in the economic situation, particularly reopening trade routes through Israel and Egypt, could give boost the popularity of Hamas in its power struggle with Palestinian President Mahmoud Abbas, whose Fatah faction holds sway in the West Bank.

PRISONER EXCHANGE

Gilad Shalit, an Israeli soldier abducted by Hamas and other fighters in 2006, could be used as a bargaining chip to dissuade Israel from invading the Gaza Strip.

Hamas officials said relatively little progress had been made in third-party talks, involving Egypt, on a deal that would free Shalit and several hundred Palestinian prisoners.

COMBAT

Hamas and other militant groups may be able to muster some 35,000 fighters to resist an invading Israeli force.

Israel, which has the best-equipped army in the Middle East and controls Gaza's airspace, could overwhelm the militants, but might not be able to stop sporadic rocket attacks on its southern towns and communities. Hamas says it has stockpiled long-range rockets that can hit the centre of the Israeli coastal city of Ashkelon, potentially posing a threat to some 250,000 residents of the city and areas close to Gaza.

Hamas fighters are believed to have prepared defences that could inflict casualties on Israeli forces.

Hamas also could activate its armed wing in the West Bank and send suicide bombers to strike in Israel.

BORDER CHAOS

Blasting new holes in the border fence with Egypt could be another option Hamas could use to alleviate the pressure and cause chaos that could disrupt Israel's military plans. Israel, which pulled troops out of the Gaza Strip in 2005, could pre-empt such a move by reoccupying the Gaza-Egypt frontier. (Editing by Robert Woodward)

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